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dc.contributor.authorLazear, Edward P.en_US
dc.date.accessioned2009-01-28T16:22:09Z-
dc.date.available2009-01-28T16:22:09Z-
dc.date.issued2003en_US
dc.identifier.urihttp://hdl.handle.net/10419/21410-
dc.description.abstractSome have observed that individuals perform worse after being promoted. The Peter Principle, which states that people are promoted to their level of incompetence, suggests that something is fundamentally misaligned in the promotion process. This view is unnecessary and inconsistent with the data. Below, it is argued that ability appears lower after promotion purely as a statistical matter. Being promoted is evidence that a standard has been met. Regression to the mean implies that future ability will be lower, on average. Firms optimally account for the regression bias in making promotion decisions, but the effect is never eliminated. Rather than evidence of a mistake, the Peter Principle is a necessary consequence of any promotion rule. Furthermore, firms that take it into account appropriately adopt an optimal strategy. Usually, firms inflate the promotion criterion to offset the Peter Principle effect, and the more important is the transitory component relative to total variation in ability, the larger the amount that the standard is inflated. The same logic applies to other situations. For example, it explains why movie sequels are worse than the original film on which they are based and why second visits to restaurants are less rewarding than the first.en_US
dc.language.isoengen_US
dc.publisheren_US
dc.relation.ispartofseriesIZA Discussion paper series 759en_US
dc.subject.jelJ6en_US
dc.subject.jelJ00en_US
dc.subject.ddc330en_US
dc.subject.keywordPeter principleen_US
dc.subject.keywordregression to the meanen_US
dc.subject.keywordstochasticen_US
dc.subject.stwErwerbsverlaufen_US
dc.subject.stwLeistungsanreizen_US
dc.subject.stwLeistungsmotivationen_US
dc.subject.stwTheorieen_US
dc.titleThe Peter Principle: A Theory of Declineen_US
dc.typeWorking Paperen_US
dc.identifier.ppn362768684en_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungen-
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

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