Working Paper BETA #2019-21

Download working-paper

Title : The Hidden Effect of Meritocratic Promotion Procedure: Experimental Evidence

Author(s) : Emilien Prost, Gaye del Lo

Abstract : The aim of this experimental paper is to show how the willingness of an employee to accept inequality of wages between him and his executive will depend on the ability on which the executive is evaluated when he is promoted. This willingness to accept inequality is captured by the minimum wage enough to incentivize to work for his executive. We show that selecting an executive on his ability to outperform his employee at his own task will be counterproductive to make employee accepting inequality of wages. We argue that the efficiency of “merit-based” promotion procedure may be challenged by this result.

Key-words : Legitimacy, leadership, tournament, contract theory, moral hazard, personnel economics

JEL Classification : D00, J50, M50, M51, D86