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Promotion rat race and public policy

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Abstract

This study investigates whether excess effort to climb a career ladder justifies policy interventions. The answer depends on whether the government is able to levy a higher tax burden on career workers than on non-career workers. Both a tax on top income aimed at lowering the rewards of promotion and a labour law that restricts excess effort require such a differentiation in the tax burden to improve welfare. The differentiation in tax burden prevents that the welfare gain of reducing excess effort is neutralized by the welfare cost connected to an increase in the number of career workers.

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  • Geir H. Bjertnæs, 2012. "Promotion rat race and public policy," Discussion Papers 686, Statistics Norway, Research Department.
    • Handle: RePEc:ssb:dispap:686
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    File URL: https://www.ssb.no/a/publikasjoner/pdf/DP/dp686.pdf
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    More about this item

    Keywords

    Tournaments; Promotions; Status; Taxation;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

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