Estimating a tournament model of intra-firm wage differentials |
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Authors: | Jiawei Chen Matthew Shum |
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Institution: | 1. Department of Economics, University of California, Irvine, United States;2. Division of Humanities and Social Sciences, California Institute of Technology, United States |
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Abstract: | We consider the estimation of a tournament model with moral hazard (based on Rosen (1986), AER)) when only aggregate data on intra-firm employment levels and salaries are available. Equilibrium restrictions of the model allow us to recover parameters of interest, including equilibrium effort levels in each hierarchical stage of the firm. We illustrate our estimation procedures using data from major retail chains in the US. We find that only a fraction of the wage differential directly compensates workers for higher effort levels, implying that a large portion of the differentials arises to maintain incentives at lower rungs of the retailers. |
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Keywords: | C13 J31 L81 |
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