Essays on wages, promotions and performance evaluations

Abstract

This dissertation comprises four empirical research articles that use personnel data from a large university and worker-level panel data from Finland to examine the determinants of wages, promotions and employee performance evaluations. The first article employs personnel data to examine the importance of worker output and job seniority as predictors of employee performance evaluations and promotions. The results suggest that better-performing employees – with output measured both in absolute terms and relative to peers – were more likely to be assigned higher performance grades and had a higher probability of being promoted to more complex jobs than their peers with similar characteristics but lower output. Additionally, the findings suggest that employees with more job seniority were evaluated as exhibiting higher performance than were their equally productive but less-experienced peers. The second article employs personnel data to evaluate the role of gender in internal promotion, employee performance evaluation and earnings determination. The results indicate that gender had no effect on the probability of being promoted, conditional on productivity, nor did it play a role in the performance evaluation of employees. Furthermore, the observed male premium in earnings was mainly attributable to individual differences in worker output and background attributes. The third article employs sample data to examine the responsiveness of the pay level to local unemployment conditions and to test the hypothesis that pay level is more responsive to the unemployment level in less agglomerated and more remote regions. The results consistently suggest that the pay level is lower in localities with a higher unemployment level. The results provide some evidence that the unemployment elasticity of pay varies across different regions of the country, but once the unobserved worker heterogeneity is controlled for, the elasticity is unrelated to the degree of regional agglomeration. The fourth article employs sample data to examine the implications of using alternative measures of unemployment to estimate the local unemployment elasticity of pay. The results illustrate that the estimate of the local unemployment elasticity of pay varies considerably depending on the unemployment measure and the estimation technique used in the analysis but is not sensitive to the level of geographical disaggregation at which unemployment is measured.