Microtheory: Profitable inequality
Published: 26 January 2022
8 February. Dr Anja Prummer, Queen Mary University of London
Dr Anja Prummer, Queen Mary University of London
'Profitable Inequality'
Tuesday 8 February, 1.00pm-2.30pm
Zoom online seminar
Abstract
What is an employer's optimal design of values for promotion among his workers? Workers compete by exerting effort, and higher effort induced by greater valuations corresponds to higher profits for the employer. Introducing inequalities in valuations makes workers' values more easily recognisable, reducing their information rent, which in turn increases effort. At the same time, inequalities lead to differences in promotion attainment, potentially reducing effort. We show that if value is redistributed within or across workers, the reduction in information rent outweighs potential losses due to inequality. Maximal dispersion and maximal discrimination emerge as features of optimal designs. We confirm our theoretical predictions in an empirical application.
Biography
Anja Prummer is a University Assistant at Johannes Kepler University Linz, a Senior Lecturer at Queen Mary University of London (on leave), a Research Affiliate at CEPR and an Associate Editor at the Economic Journal. Previously, she was a Postdoctoral Fellow at the Cambridge-INET Institute, University of Cambridge. She received her PhD from the European University Institute, Florence. Her research interest is Microtheory with applications to Culture, Gender and Political Economy. She has visited the University of Wisconsin - Madison, University of California, Berkeley, New York University, Duke and PUC Rio for extended periods.
Further information: business-events@glasgow.ac.uk
First published: 26 January 2022
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