Earnings Progression, Human Capital and Incentives:Theory and Evidence

The career prospects of newly recruited employees differ substantially within an organization.The stars experience a considerable growth in earnings; others can hardly maintain theirentry salaries. This article sheds light on the mechanisms generating the observedheterogeneity in earnings progression by investigating the effects of on-the-job human capitalacquisition, explicit short-run incentives and career concern incentives on earningsprogression. The model leads to predictions about the incentive structure and theprogression in both cross-sectional and individual earnings which are supported by theempirical analysis based on personnel records from a large bank....