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Title: Career Concerns with Cost Uncertainty

Citation Type: Miscellaneous

Publication Year: 2019

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Abstract: I consider a continuous-time career concerns model. As in Holmstro ̈m (1999), there is symmetric uncertainty about a worker’s ability. Also, the worker has private information about her conscientiousness (cost of effort). The sequence of observed outputs allows learning about both attributes of the worker. As in the career concerns literature, incentives to exert effort are driven in part by a signal-jamming motive, i.e., the desire to manipulate the market’s beliefs about the worker’s ability. In line with prior results, this motive is present throughout the worker’s lifetime, but its im- pact on the worker’s effort gradually decreases over time as the market learns the worker’s ability. In contrast, the motive to signal conscientiousness is more nuanced and changes sign as time progresses. I find that early in her career, cost uncertainty pushes the agent to work harder to signal that she is conscientious. During her mid- dle and late career, the agent has an incentive to signal that she is lazy. In the second phase of her career, the agent lowers her effort to seem lazy. During her late career, the agent, surprisingly, increases her effort in order to convince the market of her lazi- ness. This result, in which the impact of cost uncertainty on effort choice changes sign twice is used to explain the patterns of residuals in the relation between earnings and work experience specified in Mincer (1974) and noted in Murphy & Welch (1990).

Url: https://www.isid.ac.in/~epu/acegd2019/papers/RavideepSethi.pdf

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Authors: Sethi, Ravideep

Publisher: David Eccles School of Business, University of Utah

Data Collections: IPUMS USA

Topics: Labor Force and Occupational Structure, Other

Countries: United States