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Prestige, Promotion, and Pay

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  • DANIEL FERREIRA
  • RADOSLAWA NIKOLOWA

Abstract

We develop a theory in which financial (and other professional services) firms design career structures to “sell” prestigious jobs to qualified candidates. Firms create less prestigious entry‐level jobs, which serve as currency for employees to pay for the right to compete for the more prestigious jobs. In optimal career structures, entry‐level employees (“associates”) compete for better‐paid and more prestigious positions (“managing directors” or “partners”). The model provides new implications relating job prestige to compensation, employment, competition, and the size of the financial sector.

Suggested Citation

  • Daniel Ferreira & Radoslawa Nikolowa, 2024. "Prestige, Promotion, and Pay," Journal of Finance, American Finance Association, vol. 79(1), pages 505-540, February.
    • Handle: RePEc:bla:jfinan:v:79:y:2024:i:1:p:505-540
    DOI: 10.1111/jofi.13301
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