Journal of Labor Economics Vol. 13 No. 4 1995
Up-or-Out Rules in the Market for Lawyers
Abstract
We examine how up-or-out rules operate as a screening device in the market for lawyers. Using data on large New York law firms, we show that firm growth is a slow and uncertain process because performance as an associate is not an especially informative signal about whether a lawyer will make a good partner and because the costs of mistaken promotion are relatively high. A newly hired associate is unlikely to be a suitable partner and the screening process is relatively imprecise. Firm growth therefore contributes between 5%-7% of the present value of profits of a law firm.
- DOI
- 10.1086/298390
- Volume
- 13
- Issue
- 4
- Pages
- 709-735
- Language
- en
- Sources
- openalex crossref