Job Design in the Presence of Career Concerns

Authors


  • We are grateful to Philippe Aghion, Gary Fethke, Oliver Hart, and Andrei Shleifer for their guidance. We also benefited from very helpful discussions with Benito Arruñada, Nittai Bergman, Gary Chamberlain, Drew Fudenberg, Jerry Green, Bengt Holmstrom, David Laibson, Ulrike Malmendier, Meg Meyer, B. Ravikumar, Roy Suddaby, Adam Szeidl, and Xavier Vives, as well as comments from seminar participants at Alicante, Bocconi, ESEM2004 (Madrid), Harvard, Iowa, Oxford, and UAB. Katy Miller and Gonçalo Pina provided excellent research assistance. The paper has also greatly benefited from the suggestions of two anonymous referees and a coeditor. Casas-Arce acknowledges financial support from Harvard University, Banco de España, and Ministerio de Ciencia y Tecnologia (SEJ2007-64340). Any errors are our own.

Abstract

We reconsider the job design theory of Holmstrom and Milgrom to include career concerns. When agents are motivated by their reputation, the discretion to pursue outside activities plays an integral part in the incentive scheme. Discretion can be a useful instrument to enhance incentives and prevent the adverse selection of low-ability agents. We argue that these synergies are useful in explaining, among other examples, the employment of US faculty members and of physicians in dual health care systems.

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