Works in Progress

Can Promotion Tournaments Produce Bad Managers? Evidence of the `Peter Principle'

with Danielle Li and Kelly Shue

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The best worker isn't always the best candidate for manager. In these cases, do firms promote the best potential manager or the best worker in their current job? Using data on the performance of sales workers from 214 firms, we find evidence consistent with the Peter Principle: firms prioritize current job performance when making promotion decisions at the expense of other observable characteristics that better predict managerial quality. We estimate that the costs of managerial mismatch are substantial, suggesting that firms are either making inefficient promotion decisions or that the incentive benefits of emphasizing current performance must also be high.


Can Reputation Discipline the Gig Economy? Experimental Evidence from an Online Labor Market

with Aaron Sojourner and Akhmed Umyarov

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In two experiments, we examine the effects of employer reputation in Amazon Mechanical Turk, an online labor market in which employers may decline to pay workers while keeping the work product. In the first experiment, a research assistant who is blinded to reputation performs tasks posted by employers with good, bad, or no online reputations. Results confirm the value of reputation; due to shorter tasks and rarer nonpayment, effective wages among good reputation employers are about 40 percent greater than those for neutral- or bad-reputation employers. In the second experiment, we create multiple employer identities endowed with different exogenously introduced reputations. We find that employers with good reputations attract workers at nearly twice the rate as those with bad reputations with no discernible difference in quality. We interpret these results through the lens of an equilibrium search model in which the threat of a bad reputation deters employers from the abuse of authority even in the absence of contractual protections of workers. The results demonstrate the value of employer reputation systems for workers and employers, and thus for labor market efficiency.


"The Incentive Effects of Shared Bonus Pools: Evidence from Fluctuations in Gainsharing Incentives"

with Sima Sajjadiani

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Shared bonus pools are a common method for distributing incentives. Using variation in the size of the bonus pool generated by a manufacturing plant's gainsharing plan, which varies incentives for quality and worker engagement, we evaluate the conditions under which incentives distributed from bonus pools actually have incentive effects. Overall, results are cautionary: the evidence suggests gainsharing's benefits operate primarily through simultaneously-adopted process improvement practices rather than gainsharing's incentive effects, and incentives can backfire if they are too small or use plant-level performance metrics. We note that random variation in the size of bonus pools offers researchers a powerful, readily available, and underused tool for studying how workers respond to the strength of incentives.


Strength from Within: Individual and Store-Level Evidence that Transfers Outperform Hires

with Ben Rissing

(Abstract TBA)


Incentives in Recessions

with Danielle Li and Kelly Shue

(Abstract TBA)