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The Peter Principle : Promotions and Declining Productivity

Author: Edward P Lazear
Publisher: Cambridge, Mass. National Bureau of Economic Research 2001.
Series: Working paper series (National Bureau of Economic Research), no. w8094.
Edition/Format:   eBook : Document : EnglishView all editions and formats
Summary:
Many have observed that individuals perform worse after having received a promotion. The most famous statement of the idea is the Peter Principle, which states that people are promoted to their level of incompetence. There are a number of possible explanations. Two are explored. The most traditional is that the prospect of promotion provides incentives which vanish after the promotion has been granted; thus, tenured  Read more...
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Details

Named Person: Laurence J Peter
Material Type: Document, Internet resource
Document Type: Internet Resource, Computer File
All Authors / Contributors: Edward P Lazear
OCLC Number: 1027348848
Notes: January 2001.
Description: 1 online resource.
Details: Mode of access: World Wide Web.
Series Title: Working paper series (National Bureau of Economic Research), no. w8094.
Responsibility: Edward P. Lazear.

Abstract:

Many have observed that individuals perform worse after having received a promotion. The most famous statement of the idea is the Peter Principle, which states that people are promoted to their level of incompetence. There are a number of possible explanations. Two are explored. The most traditional is that the prospect of promotion provides incentives which vanish after the promotion has been granted; thus, tenured faculty slack off. Another is that output as a statistical matter is expected to fall. Being promoted is evidence that a standard has been met. Regression to the mean implies that future productivity will decline on average. Firms optimally account for the regression bias in making promotion decisions, but the effect is never eliminated. Both explanations are analyzed. The statistical point always holds; the slacking off story holds only under certain compensation structures.

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