The paper studies how a person's concern for a future career may influence
his or her incentives to put in effort or make decisions on the job. In the
model, the person's productive abilities are revealed over time through ob
servations of performance. There are no explicit output-contingent contract
s, but since the wage in each period is based on expected output and expect
ed output depends on assessed ability, an "implicit contract" links today's
performance to future wages. An incentive problem arises from the person's
ability and desire to influence the learning process, and therefore the wa
ge process, by taking unobserved actions that affect today's performance. T
he fundamental incongruity in preferences is between the individual's conce
rn for human capital returns and the firm's concern for financial returns.
The two need be only weakly related. It is shown that career motives can be
beneficial as well as detrimental, depending on how well the two kinds of
capital returns are aligned.