NBER Working Papers and Publications
|February 2018||Promotions and the Peter Principle|
with Alan Benson, Kelly Shue: w24343
The best worker is not always the best candidate for manager. In these cases, do firms promote the best potential manager or the best worker in her current job? Using microdata on the performance of sales workers at 214 firms, we find evidence consistent with the “Peter Principle,” which predicts that firms prioritize current job performance in promotion decisions at the expense of other observable characteristics that better predict managerial performance. We estimate that the costs of promoting workers with lower managerial potential are high, suggesting either that firms are making inefficient promotion decisions or that the benefits of promotion-based incentives are great enough to justify the costs of managerial mismatch.
|November 2015||Discretion in Hiring|
with Mitchell Hoffman, Lisa B. Kahn: w21709
Job testing technologies enable firms to rely less on human judgement when making hiring decisions. Placing more weight on test scores may improve hiring decisions by reducing the influence of human bias or mistakes but may also lead firms to forgo the potentially valuable private information of their managers. We study the introduction of job testing across 15 firms employing low-skilled service sector workers. When faced with similar applicant pools, we find that managers who appear to hire against test recommendations end up with worse average hires. This suggests that managers often overrule test recommendations because they are biased or mistaken, not only because they have superior private information.
|January 2015||Public R&D Investments and Private-sector Patenting: Evidence from NIH Funding Rules|
with Pierre Azoulay, Joshua S. Graff Zivin, Bhaven N. Sampat: w20889
We quantify the impact of scientific grant funding at the National Institutes of Health (NIH) on patenting by pharmaceutical and biotechnology firms. Our paper makes two contributions. First, we use newly constructed bibliometric data to develop a method for flexibly linking specific grant expenditures to private-sector innovations. Second, we take advantage of idiosyncratic rigidities in the rules governing NIH peer review to generate exogenous variation in funding across research areas. Our results show that NIH funding spurs the development of private-sector patents: a $10 million boost in NIH funding leads to a net increase of 2.3 patents. Though valuing patents is difficult, we report a range of estimates for the private value of these patents using different approaches.
|October 2009||Cheaper By the Dozen: Using Sibling Discounts at Catholic Schools to Estimate the Price Elasticity of Private School Attendance|
with Susan Dynarski, Jonathan Gruber: w15461
The effect of vouchers on sorting between private and public schools depends upon the price elasticity of demand for private schooling. Estimating this elasticity is empirically challenging because prices and quantities are jointly determined in the market for private schooling. We exploit a unique and previously undocumented source of variation in private school tuition to estimate this key parameter. A majority of Catholic elementary schools offer discounts to families that enroll more than one child in the school in a given year. Catholic school tuition costs therefore depend upon the interaction of the number and spacing of a family's children with the pricing policies of the local school. This within-neighborhood variation in tuition prices allows us to control for unobserved determin...