PROMOTION, TURNOVER, AND PREEMPTIVE WAGE OFFERS

This paper examines the strategic promotion and wage decisions of empl oyers when employees may be more valuable to competing firms. Competin g employers must incur a cost to learn the quality of their match with a manager. Promotion signals that workers are potentially valuable ma nagers in other firms and so can lead to turnover. To preempt competit ion for a manager, an employer may offer a wage high enough to discour age competitors from acquiring information and bidding up the wage fur ther or hiring the worker away. This transfers wages from good workers to bad. More costly information acquisition yields greater expected l ifetime wages.