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Career Concerns and the Nature of Skills

Author

Listed:
  • Gonzalo Cisternas
Abstract
I examine how career concerns are shaped by the nature of productive actions taken by workers. A worker's skills follow a Gaussian process with an endogenous component reflecting human-capital accumulation. Effort and skills are substitutes both in the output process (as in Holmstrom 1999) and in the skills technology. The focus is on deterministic equilibria by virtue of Gaussian learning. When effort and skills are direct inputs to production and skills are exogenous, effort can be inefficiently high in the beginning of a career. In contrast, when skills are the only input to production but accumulate through past effort choices, the worker always underinvests in skill acquisition. At the center of the discrepancy are two types of ex post errors that arise at interpreting output due to an identification problem faced by the market. Finally, the robustness of the underinvestment result is explored via variations in the skill-accumulation technology and in the information structure, and policy implications are discussed.

Suggested Citation

  • Gonzalo Cisternas, 2018. "Career Concerns and the Nature of Skills," American Economic Journal: Microeconomics, American Economic Association, vol. 10(2), pages 152-189, May.
    • Handle: RePEc:aea:aejmic:v:10:y:2018:i:2:p:152-89
    Note: DOI: 10.1257/mic.20160277
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Kolb, Aaron M., 2019. "Strategic real options," Journal of Economic Theory, Elsevier, vol. 183(C), pages 344-383.
    2. Villeneuve, Stéphane & Abi Jaber, Eduardo, 2022. "Gaussian Agency problems with memory and Linear Contracts," TSE Working Papers 22-1363, Toulouse School of Economics (TSE).
    3. Singh, Usha & Ghadiri, Argang & Weimar, Daniel & Prinz, Joachim, 2020. "“Let’s have a break”: An experimental comparison of work-break interventions and their impact on performance," Journal of Business Research, Elsevier, vol. 112(C), pages 128-135.
    4. Fudenberg, Drew & Georgiadis, George & Rayo, Luis, 2021. "Working to learn," Journal of Economic Theory, Elsevier, vol. 197(C).
    5. Johannes Hörner & Nicolas S Lambert, 2021. "Motivational Ratings [Toward the Next Generation of Recommender Systems: A Survey of the State-of-the-Art and Possible Extensions]," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 88(4), pages 1892-1935.
    6. Eduardo Abi Jaber & Stéphane Villeneuve, 2022. "Gaussian Agency problems with memory and Linear Contracts," Working Papers hal-03783062, HAL.
    7. Eduardo Abi Jaber & Stéphane Villeneuve, 2022. "Gaussian Agency problems with memory and Linear Contracts," Post-Print hal-03783062, HAL.
    8. Marino, Anthony M., 2021. "Productivity investment with hidden action," Journal of Economic Behavior & Organization, Elsevier, vol. 190(C), pages 154-163.
    9. Moisson, Paul-Henri, 2024. "Meritocracy and Inequality," TSE Working Papers 24-1518, Toulouse School of Economics (TSE), revised Apr 2024.
    10. Eduardo Abi Jaber & St'ephane Villeneuve, 2022. "Gaussian Agency problems with memory and Linear Contracts," Papers 2209.10878, arXiv.org.
    11. Grabiszewski, Konrad & Horenstein, Alex, 2020. "Effort is not a monotonic function of skills: Results from a global mobile experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 176(C), pages 634-652.

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    More about this item

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • I26 - Health, Education, and Welfare - - Education - - - Returns to Education
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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