Performance Ratings and Career Advancement in the US Federal Civil Service

Abstract

A strong link between performance and rewards in the U.S. federal civil service could raise top performers to positions of power and responsibility and motivate employees to greater productivity. Federal employees, the general population and scholars all express doubts about the strength of that link, however, though few have estimated it empirically. Using random-effects panel data models on a one per cent sample of federal personnel records for 1988–2003, we examine whether performance ratings meaningfully influence promotion probabilities and annual salary increases. With an average annual promotion rate of 17.8 per cent over this period, we estimate that employees with ‘outstanding’ and ‘less than fully successful’ ratings were one-fourth more likely and one-fifth less likely, respectively, to receive promotions than those with ‘fully successful’ ratings. Average salary impacts were smaller but still significant. Patterns held up across agencies and stages of the federal careers. Performance ratings continued to affect career advancement one or two years later. We speculate on whether these links are strong enough to motivate performance and advance the most qualified federal employees.     

The purchasing power parity of Southeast Asian currencies: A time-varying coefficient approach

The economies of Southeast Asia have undergone several structural changes, including the Asian currency crisis, during the post-Bretton Woods era. We use a time-varying coefficient cointegration model to test for purchasing power parity (PPP) of Southeast Asian currencies and to track changes in purchasing power relationships over time. The main empirical findings are as follows. First, the stability of the relationship between exchange rates and price differentials is strongly rejected. Second, a major structural change occurs at the outbreak of the Asian currency crisis in 1997. Third, when the cointegration vector is allowed to vary with time, we find evidence of a cointegration relationship for four countries in terms of the US dollar and for four countries in terms of the Japanese yen. Therefore, it seems unlikely that Southeast Asian currencies form a “yen bloc.”     

Growth opportunities and trade credit: evidence from Chinese listed firms

Private firms in China have led the explosive growth of the country’s economy, but with restricted or no access to formal financing. It is puzzling that these firms use relatively less trade credit than their counterparts in developed countries. We argue that firms with more growth opportunities should rely mainly on internal financing owing to high asymmetric information, especially in a financial market environment biased towards state-owned enterprises (SOEs) such as China. To explore growth opportunities, these firms may reduce their level of trade credit in the trade-off they face in deciding where to invest. Using panel data of Chinese non-financial listed firms for the period 2003–2013, we find that the relationship between growth opportunities and trade credit (both accounts receivable and payable) is significantly negative and is more pronounced in private firms than in SOEs. Furthermore, we also find that subsequent to the new receivable pledge policy being introduced, Chinese firms with more growth opportunities have higher accounts receivable, but similar levels of accounts payable.     

Changes in cyclical patterns of the USA labor market: from the perspective of nonlinear Okun’s law

The validity of Okun’s law has been debated because of the increase in cyclicality in aggregate hours after 1985. To investigate this, I measure Okun’s coefficients in three phases of the business cycle – recession, early, and late expansions. I found that an increased coefficient for aggregate hours is due to the increased responsiveness of the employment rate during late expansions and to the increased responsiveness of hours per employee during early expansions. These findings question the flexible labor market hypothesis focusing on firms’ firing behaviors during recessions. Rather, working hours’ flexibility represents a more prominent feature of the post-1985 USA labor market.