Careers and incentives of Japanese "fast-track" bureaucrats:a career-path dependent model perspective

Transcription

1 RITI icuion Par Sri Carr and incntiv of Jaan "fat-track" buraucrat: carr-ath dndnt modl rctiv TSURU Kotaro RITI Th Rarch Intitut of conomy Trad and Indutry htt://

2 RITI icuion Par Sri cmbr 00 Carr and incntiv of Jaan fat-track buraucrat carr-ath dndnt modl rctiv Kotaro Turu btract: In thi ar w rnt a ath-dndnc modl for fat-track Jaan buraucrat cially focuing on it incntiv mchanim. Without a rformanc bad ay chm th ath dndnt modl can giv an incntiv to work hard and win good romotion to a workr by linking th rank of hi final job to th riz. In articular th baic ath dndnt modl with qual riz rad can induc th am lvl of ffort at vry job ot and vn lor continu to mak thir ffort to gt highr riz within thir oortuniti. Howvr th choic of an incntiv chm may dnd on th amakudari oortuniti of a minitry. Minitri with l amakudari oortuniti might adot chm without rvaling th job oition of workr (or th roct of thir riz to thm. Such tratgi can incra th lvl of ffort givn th xctd riz it hould ay but rduc th wlfar of workr. Ky word: uraucrat; Carr; Incntiv; Path-dndnc; Priz; Promotion; Tournamnt JL claification: H J J4 M Snior Fllow Rarch Intitut of conomy Trad and Indutry (-mail: turu-kotaro@riti.go.j. Th author i gratful for hlful commnt and uggtion by Maahiko oki ndra oltho Hidhi Itoh Margart Myr Iao Ohahi Margart Stvn and minar articiant at Rarch Intitut of conomy Trad and Indutry and Hitotubahi Univrity.

3 Introduction. Som baic fatur of th Jaan mloymnt ytm Th uro of thi ar i to rovid a thortical modl which may wll dcrib th carr ytm of fat-track buraucrat in Jaan. Th ar candidat for high-ranking govrnmnt official oition in th cntral govrnmnt. for w focu on th buraucrat w brifly rviw th baic fatur of th Jaan mloymnt ytm cially in comarion with that of th US (oki (988 Itoh (994 Turu (996. Th main tylid fact (for mloymnt in larg comani or govrnmnt during th ot war riod (until th 980 ar a follow: (Stylid fact Long-trm mloymnt rlationhi ar mor rvalnt than in othr countri and mot of th xcutiv dirctor ar romotd intrnally (.g. Hahimoto and Raiian (985 Koik (988 OC (99 (Stylid fact g-arning rofil ar much tr ( dfrrd comnation. (.g. Hahimoto and Raiian (985 Koik (988 OC (99 Turu (996 (Stylid fact

4 uring th firt tn or fiftn yar workr ar not o much diffrntiatd in trm of wag and job lvl cially in comarion with th ca of th US. Thn only a limitd numbr of mloy ar lctd to go on to managmnt oition (.g. Koik (988 Kato and Rockl (99. (Stylid fact 4 Prformanc-bad ay chm ar l rvalnt. Th fact ar mutually comlmntary. For xaml th cond third and fourth fact dnd on th firt fact th long-trm mloymnt rlationhi. Th cond fact i oftn dicud a vidnc of dfrrd comnation (Lazar (979. Such an intr-tmoral allocation of comnation i only oibl bcau both th mloyr and mloy hav committd thmlv for a long-trm rlationhi. Th rcnt dvlomnt of contract thory and ronnl conomic can wll xlain th virtu of th arrangmnt (for a urvy.g. Gibbon (997 Gibbon and Waldman (999 Lazar ( Prndrgat (999. For xaml co-orativ bhaviour and tamwork among workr ar nhancd by long-trm rlationhi ( ratd gam and mor qual tratmnt (Lazar (989 Prndrgat (99. Firm-cific invtmnt i alo romotd by a long-trm rlationhi ( rutation (MacLod and Malcomon (989 and by job-bad romotion (Prndrgat (99. In addition a buraucratic chm for wag and romotion olicy alo minimi influnc (or rnt-king activiti vi-a-vi urvior (Milgrom and Robrt (988 or favouritim from thm (Prndrgat and Tol (996.

5 Howvr without a rformanc-bad ay chm how can an mloyr giv hi (young workr incntiv to work hard? Thi i a uzzl inc thy work undr th commitmnt on th long-trm rlationhi and young workr ar not o much diffrntiatd. To undrtand th incntiv ytm in th Jaan mloymnt ytm it hould b notd that th roct of a workr futur comnation i uually aociatd with th rank of hi final ot in hi firm or govrnmnt. Whn th lction roc tart in hi latr carr tag it omtim look lik an limination tournamnt or an u or out chm. workr who i not good nough to b romotd may k taying at hi job lvl until hi rtirmnt or i inducd to lav voluntarily and mov to an affiliatd firm of hi comany. ttr workr can tay longr in th firm and climb u to th highr hirarchy thu gtting largr bnfit than othr.. aic fatur of th carr ytm in th fat-track Jaan buraucracy Nxt lt u conidr th carr ytm of fat-track buraucrat in Jaan. Th tylid fatur of th Jaan mloymnt ytm dcribd in th Introduction ar likly to b mor alicabl to fat-track Jaan buraucracy. Firt of all rank and rlatd wag lvl ar dtrmind only by niority and ay-for-rformanc ytm ar hardly ud. uring th firt twnty yar or o carr or rutation concrn ar ud a an incntiv mchanim for fat track official. good official i romotd to a good job but thr i no diffrnc in wag btwn good and bad job at th am lvl. 4

6 Scond howvr th amount of a buraucrat liftim comnation dnd trictly on th job lvl at which h lav hi minitry. aration roc tart aftr h bcom iviion Had ( kacho (around th twntith yar. Onc th aration roc bgin th lowt valuatd mloy i inducd to lav voluntarily. In th final carr tag (at highr rank of a minitry th marginal incra in comnation by romotion i vry larg (th ag (job wag rofil i xtrmly t. In addition laving allowanc ar linkd roughly to th lvl of final comnation multilid by th yar of hi rvic. Mor imortantly th comnation lvl of ot-rtirmnt or cond job in th rivat (quai-ublic ctor i alo trongly aociatd with hi final job lvl in th buraucracy (a cond job i calld amakudari or dcnt from havn. Th lvl i uually no l than that of th mloy final wag in hi minitry and th ronnl diviion can ruad him to lav voluntarily. Thu th marginal rturn to urvival in th cohort and romotion to th nxt job lvl i o trong a to giv a trmndou incntiv to fat track buraucrat ovr thir whol carr. Fat track buraucrat ar likly to ut mor imortanc on thir futur romotion roct and xctd bnfit a a dtrminant of thir currnt ffort lvl than otntial candidat for chif xcutiv oition in larg rivat firm. On of th ditinctiv fatur of thi lction roc i th adotion of a vry trict rul of u-or-out or limination tournamnt. In othr word an official that i not romotd mut lav hi minitry. n u-or-out rul can b n in othr countri but it i uually rtrictd to th military acadmia and rofional artnrhi. Jaan larg comani alo u a imilar ytm inducing om nior workr to 5

7 lav voluntarily from thir firm and mov to affiliatd firm whil othr continu to work for thir firm a cialit without furthr romotion. W will dicu th imlication of an u-or-out rul latr. Third comtition and lction tak lac only among a mall numbr of homognou workr th-am-yar rcruit or a grou of collagu who joind a minitry in th am yar. Thi i in contrat to what han in larg rivat firm. Promotion to th hight-ranking official oition (a duty minitr who i lik a CO in a comany tak lac only among th-am-yar rcruit (about 0 0 ron. Thi man that a duty minitr i baically lctd from a cohort of ach yar. Lvl of comnation and rank ar th am among th mmbr in th am grou but trictly diffrnt btwn tho of two diffrnt grou inc wag lvl ar linkd to niority. Thi imli that vn an official at th bottom of on grou can k a highr rank and comnation lvl than th bt rformr who join th minitry a yar latr. Thu junior mmbr can nvr gt ahad of any mmbr who hav joind th minitry arlir. Such a rigid niority rul rvnt lor from bing dmoralid. vn though thir quality i wll known to othr lor can till k thir fac in th hirarchy of thir minitry. In thi n a trict u-or-out rul i imortant and can liminat a dmoraliing ituation in which th nior lor ar rankd at a lowr lvl than that of junior winnr. Nxt w rnt a iml modl of job-bad romotion ( th carr ath-dndnt modl. In thi modl a workr xctd comnation i aociatd with th rank of 6

8 hi final job. y udating th roct of hi final ot and rlatd comnation h dtrmin hi currnt ffort lvl for good romotion. Thi modl i conitnt with th tylid fact of Jaan fat-track buraucrat.. Th carr ath dndnt modl. Introduction What i th mchanim that dtrmin th final romotion lvl of a workr? arntly thir ability and ffort ar vry imortant factor. In addition carr hitory i oftn ud in th lction roc. Whn th comnation ytm i rlativly buraucratic and indndnt from a workr rformanc a workr lction might b a job-bad romotion. Whn h i rcivd to hav high ability or ffort lvl h i romotd to a good job. In thi ca a workr carr ath might aggrgat all th information that ha bn ud for hi romotion dciion (ability ffort and othr factor. Thu without rformanc-bad comnation chm a workr and th firm (th ronnl diviion car mor about th outcom of job-bad romotion and carr ath. Thu a workr carr ath form hi rutation. If th ronnl diviion u carr ath ( rutation in it romotion olicy carr will bcom ath-dndnt. In thi ction w introduc a iml modl to formulat th abov ida. Th mot imortant aumtion i that a workr job tomorrow dnd on hi job today and thu on hi at job hitory. Thr ar vral raon why thi aumtion i raonabl. Firt th xrinc of a good job might incra hi ability and thu incra hi roductivity whn h i romotd to anothr good job. In uch a ca it 7

9 i raonabl to aum that th quality of hi job tomorrow i cloly rlatd to that of hi job today. Scond uch limitd choic on nxt job might rduc th tranaction and valuation cot incurrd by th ronnl diviion. Th ath dndnt ytm lad to mor natural lction among homognou workr in th long run. Third uch a limitd job-bad romotion rvnt influnc activiti of a workr to hi urvior or th ronnl diviion or thir favouritim to cific workr (.g. Fairburn and Malcomon (00 Prndrgat and Tol (996.. Th baic tting Lt u conidr a workr and th ronnl diviion of a minitry. Thi minitry ha n layr of niority and th t-th layr ( t n ha t diffrnt job catgori (Figur. Th job can b rankd according to thir quality. Lt J (t b th -th bt job in th t-th layr ( t and Q (J (t b it quality. Thn Q ( J ( t > Q ( J ( t > > Q ( J ( t t > Q ( J ( t t If th job of a workr i J(t today h will b romotd to a good job J(t or to a bad job J(t tomorrow. t vry tag h gt a fixd wag W (for imlicity 0. Whn h rach th n-th layr (J (n h gt a riz which i linkd to th rank of hi job Q (J (n. Thu > > > n > n 8

10 Lt (t b th robability of bing romotd from job J (t to J (t. Thu th robability of bing romotd to job J (t i qual to (t. For imlicity a workr incur a cot of C ( whn h t hi ffort lvl in ordr to b romotd to a good job with th robability of. C ( i aumd to b indndnt from hi currnt job J (t (W will dicu thi aumtion latr.. mor xlicit xaml of thi romotion roc will b dicud latr. C ( i incraing and trictly convx uch that C C C ( 0 0 ( 0 0 ( workr with th job of J (t maximi hi xctd riz (J (t minu hi cot of ffort in riod t by chooing th robability of good romotion (t. Max ( t Max ( t Max Max ( ( J ( t C( ( t ( ( J ( t C( ( t ( ( J ( t ( ( J ( t C( { [ ( J ( t ( J ( t ] ( J ( t C( } Sinc ( J ( n ( n ( n ( t ( n ( n ( t 9

11 ( n ( t ( n ( t can b calculatd by uing backward induction and thy ar all indndnt from (t. Thu th firt-ordr condition i ( ( J ( t ( J ( t C Thu hi ffort lvl and hnc th robability to b romotd to a good job incra with th diffrnc in th xctd riz valu btwn two job. Thu th abolut valu of th xctd riz do not itlf affct hi ffort lvl. vn if thi lvl i low h ha a good incntiv to mak an ffort whn th diffrnc in xctd riz valu btwn two job availabl in th nxt riod i larg. Howvr it hould b notd that a workr mak an ffort only whn th xctd incra in hi riz i highr than hi currnt cot. Thu C ( [ ( J ( t ( J ( t ] workr tart from th firt layr with on job catgory in riod. In vry riod h dtrmin hi ffort lvl and thu th robability of bing romotd to a good job in th nxt layr by udating hi xctd riz. In riod n h gt hi riz linkd to th rank of hi final job. 0

12 Th imortant aumtion of thi modl i that a workr carr hitory i vry ath-dndnt. Hi job tomorrow dnd on hi job today which alo dnd on hi at job xrinc. For xaml a workr who rach J (n can b conidrd a th duty minitr of th minitry who mut hav bn romotd to a good job in vry layr. Mor gnrally a workr with th job J (t in riod t mut hav xrincd t tim of good romotion in th lat t riod. Such a workr i only romotd from two job cla J (t- or J (t- - in riod t-. nd a h climb u th job layr th xctd rang of hi final job ranking i narrowd.. Priz tructur and incntiv On of th intrting fatur of thi modl i that (t i dtrmind by th combination of { } n. In articular whn ach riz rad i qual n n n P (t ha a contant valu which atifi th following condition (Figur. C ( t ( Thi imli that a workr k th am lvl of ffort in whatvr job h i romotd to. vn though h ha lot a chanc to bcom a CO (rach J (n h

13 do not dcra hi ffort lvl inc hi marginal bnfit to b romotd to a good job i alway th am in all job catgori (qual to. Thi rult can b obtaind by backward induction. It i clar that ( n Thu C ( ( ( ( ( ( ( ( n ( ( n In thi ca th corronding xctd riz i calculatd a follow. n k n k ( n! ( J ( ( ( k k! ( n k! k 0 Siml mathmatic rovid th following rult. ( J ( ( n Mor gnrally w can obtain

14 ( J ( t ( n t ( t.4 Th romotion mchanim Nxt undr th aumtion that ach riz rad i qual a mntiond abov w introduc a mor xlicit mchanim for a workr romotion roc. Lt u aum that th ronnl diviion t a targt (T on th outut of a workr (x which i th um of hi ability (a ffort ( and an rror (u x a u a: a workr ability : a workr ffort u: a random variabl ( ( 0 σ N Whn hi outut i highr than th targt h i romotd to a good job. workr ability i aumd to b common knowldg and th ronnl diviion know it. Thu th workr maximiation roblm at J (t i a follow. Max Max Max Max P ( ( J ( t c( ( ( J ( t ( ( J ( t c( ( ( ( J ( t ( J ( t ( J ( t c( ( ( J ( t c( r ob( a u > T whr c( i th cot of hi ffort.

15 Th firt ordr condition i ( a u > T ( F( T a P r ob f ( a T c ( whr F and f i th ditribution and dnity function of u rctivly. Thu th quilibrium ffort hould atify th following condition. f c ( ( a T Undr th aumtion of qual riz rad th ffort lvl i th am at vry job that h i romotd to. In ordr to driv th cot with rct to th robability of good romotion ( ( C F T ( T a a F ( Thu C ( ( c( c T a F (.5 Th minitry maximiation roblm Nxt w conidr th minitry maximiation roblm with a ca of th qual riz rad. Th minitry i aumd to maximi th minitry xctd bnfit ubjct Gibb (995 adot th am romotion rul in hi iml modl. 4

16 to a workr articiation contraint (or a long-trm commitmnt by chooing th aroriat lvl of and. Th imortant oint i that only affct a workr incntiv. Thu th minitry choo th otimal lvl of firt and dtrmin th lvl of in ordr to atify articiation contraint. W conidr th articiation contraint of a workr at J (n- n- inc thir contraint ar th mot binding. workr continu to tay a long a hi ay-off of taying i highr than hi ay-off of quitting. Thi imli that h tay vn if hi xctd ay-off (th xctd riz minu total cot i ngativ. Sinc hi cot incurrd in rviou riod ar unk it i worth whil to tay whnvr hi xctd riz i highr than hi additional futur cot o that h can rcou om of hi unk cot. Thi contraint i a follow. For imlicity w aum that an outid oortunity or rrvation utility of a workr i qual to zro. ( n C ( ( J ( n n ( n C( ( n C( C ( To minimi it cot th minitry choo th lvl of a follow. C ( It hould alo b notd that a workr mak an ffort at vry job only if C( 5

17 Thu th valu of th lowt riz i ngativ. In othr word th lowt riz i conidrd a a nalty. From th viwoint of th minitry it xtract rnt from a workr to th minitry. Th minitry maximiation roblm i Max Max Max [( n ( J ( ]. t. c. t. c ( [( n ( n ( ] ( ( ( [( n c( ( n ( ] Th firt-ordr condition i ( n ( c ( ( n ( 0 Thu c ( ( n ( n ( F( T a Thu marginal cot of a workr ffort i l than it marginal bnfit to th minitry (qual to on and th ffort lvl i infficint. Th minitry can t in th following way. 6

18 f ( a T ( n ( n ( F( T a Thn th minitry choo th lvl of which atifi th abov contraint givn th lvl of. [ c( ( F ( T a ].6 Mor gnral ath-dndnc modl Hr w conidr mor gnral modl of carr ath with thr riod (Figur. riz tructur i a follow. Priod Priod Priz Good (or a Good Good ad (or fail ad Good ad ad 4 Th riz hould atify th following condition. 4 4 In th tandard ath-dndnc modl w imlicitly aum that i qual to. 7

19 W conidr mor gnral ca in which and ar diffrnt. 0 For imlicity th riz rad btwn and and that btwn and 4 i qual to. Thu 4 Thu w obtain th following rult by iml calculation. C C ( ( C( ( ( ( Th rult imli that > 0 ( > ( ( < 0 ( < ( ( arly lction (> (Figur ( Whn i largr than arly good romotion i mor imortant than that in th latr riod th lvl of ffort and th robability of good romotion i highr in riod than that in riod. Thi ca i conidrd a arly lction. Onc h i 8

20 romotd to bad job in riod h will nvr rach th final ot that an arly winnr can win. Thu th outcom in th firt riod i much mor crucial to dtrmin hi latr carr ath and h mak ignificant ffort in th arlir riod. Lat lction (< (Figur ( Whn i mallr than good romotion in th latr riod i conidrd mor valuabl and a workr mak l ffort in riod than riod.thi ca can b conidrd a a conolation match inc latr ucc i mor imortant than arlir ucc. Lt u think two xtrm ca furthr. Th mrit ytm On i a ca that. Thi man that if a workr mak a ucc in th latr riod hi rformanc in th arlir riod i ignord. Thi arrangmnt look lik th mrit ytm or th lu oint ytm. W conidr th following xaml (Figur (. 4 C C C ( m ( ( m ( ( ( ( ( ( < m m m Comard with th tandard ath-dndnc modl ( th ffort lvl at J( 9

21 i highr and that at J ( i lowr. Th dmrit ytm Nxt w rnt th othr xtrm ca with 4 and th following riz tructur (Figur (4. Thi imli that onc a workr fail to b romotd a good job in th latr riod hi good romotion in th arly riod ha no valu. Thi arrangmnt can b calld a th dmrit ytm or th minu oint ytm. 4 C C C ( d ( ( d ( ( ( ( ( ( < d d d Comard with th tandard ath-dndnc modl ( th ffort lvl at J ( i highr and that at J ( i again lowr. In ummary whn w loon th aumtion of th tandard ath-dndnt modl ( w can conidr thr kind of modl. arly lction: Thi modl ha a oitiv valu of in othr word arly romotion i mor imortant. In thi modl a workr xrt mor ffort in th arlir riod. 0

22 Lat lction with th mrit ytm : Thi modl ha a ngativ valu of. Thu romotion in th latr riod i mor valuabl. In thi ca a diffrnc btwn and i mallr than that btwn and 4. Th modl with th mrit ytm rovid a highr incntiv to mak ffort to a lor in riod. Lat lction with th dmrit ytm : Thi modl ha alo a ngativ valu of but a diffrnc btwn and 4 i much lowr. Thi chm giv a winnr th hight lvl of ffort in riod. Th rult uggt that th minitry might choo a diffrnt chm dnding on th rlativ imortanc of a workr ffort that th minitry focu on. Howvr whn tamwork or co-oration i imortant among workr in diffrnt job th minitry may want to minimi a diffrnc in ffort lvl among workr inc th xitnc of a workr with l ffort lvl might dmorali a workr with high ffort lvl. In uch a ca th minitry ha an incntiv to choo th tandard ath-dndnc modl with qual riz rad. Thu w conidr th tandard ath-dndnt modl with qual riz rad a a baic chm for fat-track govrnmnt official in Jaan..7 Summary In th carr dndnt modl riz ar givn at th nd of contract and ar linkd to

23 th rank of hi final job. fixd wag in vry riod i aumd to b zro. Thu th intr-tmoral comnation attrn i xtrmly dfrrd and thi attrn giv a workr a trong incntiv to tay within firm until h gt a riz and an minitry can uort uch an incntiv by conidring th articiation contraint Without ay-for-rformanc chm howvr a workr ha an incntiv to work hard in vry riod for good romotion which would incra th xctd riz. Hi ffort lvl and th robability of good romotion ar dtrmind by a diffrnc in hi xctd riz btwn two job availabl in th nxt riod. Th fatur of thi modl ar conitnt with th carr ytm of fat-track govrnmnt official in Jaan a w hav n in Introduction. Th alication of th carr ath dndnt modl to fat-track Jaan buraucrat. Th alicability of th carr ath dndnt modl to th incntiv ytm of fat-track Jaan buraucrat Th ath-dndnt modl might xlain an incntiv ytm of a rivat firm but i mor likly to alicabl to fat-track Jaan buraucrat. Firt ath-dndnc in romotion roc can mitigat om roblm rlatd to a fundamntal difficulty in valuating th rformanc of govrnmnt official. Undr th circumtanc th ronnl diviion could hav a dicrtionary owr to valuat official and would invit mor influnc activiti and favouritim. To avoid th infficinci tying

24 thir hand (a mor buraucratic and rigid arrangmnt on romotion rul i on olution. In addition a ath-dndnt chm can diffrntiat btwn workr with th am quality in th long run. Thu whn th ability of workr i rlativly homognou but a lction mchanim i alo ncary th ath-dndnt modl might b aroriat. Scond th oortunity of gtting a rofitabl job aftr rtirmnt ( amakudari giv a buraucrat a trongr incntiv to b romotd to a highr job lvl in hi minitry than workr in larg rivat mloyr inc th wag lvl of hi cond job i normally no l and omtim highr than that of hi final ot in hi minitry. Thi i actually on of th imortant dtrminant on th rcruit choic of a minitry and can b conidrd a a ort of riz in th carr ath dndnt modl. Th oortunity of amakudari that a minitry can rovid dnd on th amount of rnt that could b hard with th rlatd rivat ctor. For xaml a rgulatory minitry can crat uch rnt by imoing ntry rtriction in th rgulatd indutry. Whn th amount of rnt takn by th govrnmnt i largr th oortunity for amakudari i alo gratr. Thu incraing or at lat king th amount of minitry-cific rnt for th futur i a fundamntal objctiv of vry mmbr in th minitry. Such rnt roduc a larg oitiv xtrnality for all mmbr of th minitry. Thortically uch an xtrnality could lad to multil quilibria of th mmbr tratgy but in rality a co-orativ quilibrium i likly to mrg in an infinit-livd minitry and among it mmbr. vry buraucrat co-orat with othr mmbr to maximi th rnt of hi minitry and maintain dynatic control by conidring th wlfar not only of th am yar

25 rcruit but alo of thir anctor and dcndant. Thi crat a trong loyalty or attachmnt to hi minitry.. Th oortunity of amakudari and diffrnt lction ytm w hav n in th lat ction th mloyr can t th lvl of riz (diffrnc in riz o that it will induc th otimal lvl of ffort. Howvr in th ca of minitry th total (xctd aymnt of riz (th xctd iz of th riz r workr multilid by th numbr of workr might oftn b l than it otimal iz du to th limitd oortuniti for amakudari. In othr word minitri ar mor likly to b financially-contraind. In uch a ca do a minitry choo a diffrnt lction ytm? For imlicity lt u conidr th carr ath-dndnt modl (thr riod (Figur 4. Thr ar two minitri and. Minitry ha larg oortuniti of amakudari and u th otimal chm with qual riz rad by raiing th iz of (r workr uch a to induc th otimal lvl of ffort. (Figur 4(. C C ( ( J ( ( Thu w aum that i qual to th minimum lvl of amakudari oortuniti uch a to induc th otimal lvl of ffort. 4

26 5 Th lat quality i th articiation contraint. W introduc a cific cot function who firt drivativ i a quadratic on. ( [ ] 0 K C Sinc ( ( ( ( c a F T K K C Th otimal lvl of ffort and hould atify th following condition: ( ( ( ( ( a T F a T F a T f a T F K Thu ( ( K C It hould b notd that ( ( ( K K C < Sinc ( C

27 6 ( K Thu ( ( 4 ( K J W can calculat and th can b xrd a a function of. 4 Minitry ha l amakudari oortunity and can rai only for th xctd aymnt of th riz r workr whr i l than. Minitry can choo vral chm givn th amount of. Th firt chm (Schm (Figur 4( i th am chm of Minitry. ( ( ( ( C J C

28 7 4 arntly th robability of good romotion or th ffort lvl i l than th otimal on of Minitry. Thu Minitry conidr th following two chm. Th main ida of th chm i that th ronnl diviion mak a workr job oition in riod.unknown to him. Schm (Figur 4( u a chm with an qual riz rad whil a workr do not know hi ot in riod. Howvr thi do not affct hi ffort lvl inc h know that hi ffort lvl hould b th am at vry job. On th othr hand a workr cannot udat hi xctd riz in riod and h ha no altrnativ but to tay in th minitry. Thu th minitry only conidr th articiation contraint at J( and ha no dro-out. In thi chm ( ( ( ( ( ( J C J C Th lat quality i th articiation contraint at J (. Thu w obtain

29 4 In thi chm th ffort lvl i highr than that of chm. Thu Minitry might rfr chm to chm. Th riz rad of chm and th abolut valu of th lowt riz i gratr than tho of chm. Thu th ffct of both carrot and tick ar trongr Th third chm (chm (Figur 4(4 conidr a ituation in which Minitry alo tratgically concal th job oition of a workr in riod but u a diffrnt riz chm. Only th bt job offr a riz and th othr two ot giv th am nalty. Minitry ak a workr to choo hi robabiliti of good romotion (or ffort in riod and riod in advanc. Minitry again conidr only th articiation contraint at J ( inc a workr ha no oortunity to udat hi xctd ay-off and quit th minitry. Th workr maximiation roblm i a follow. Lt u aum that ar th robability of good romotion in th firt and cond riod rctivly. Max ( C( C( Th firt ordr condition ar 8

30 C C ( ( Thr i a ymmtric quilibrium uch that C ( ( J ( ( ( J ( C Thu w obtain th following rult. 4 ( Th robability of good romotion of chm i qual to that of chm and gratr than that of chm. To facilitat a comarion among th chm w aum that.i jut a half of. Thn w obtain 9

31 ( 4 4 Th firt riz of chm i alway highr than that of chm inc ( ( ( ( > Thu if Minitry car about th lvl of th firt riz (for xaml if a workr in Minitry i rik-taking it might choo chm. In ummary Minitry which ha l amakudari oortuniti and i financially contraind may choo chm or. In articular Minitry can induc th

32 otimal lvl of ffort (of Minitry by uing only half th amount of. undr th aumtion of our cot function. Th chm ak otntial dro-out to continu to mak an ffort in th cond riod. Hnc th mloyr can t th abolut valu of th lowt riz (th nalty at a high lvl and incra th riz rad (chm or giv a riz only to a workr winning th bt oition (chm. a rult th arrangmnt incra a workr ffort. It hould b notd howvr that th workr nt xctd riz (th xctd riz minu th cot of ffort i rducd to zro in chm and. Thu Minitry with chm or may hav om difficulti in attracting qualifid workr than Minitry that can guarant th oitiv xctd riz for thm. In thi n Minitry do not want to adot chm or vn if thy can furthr incra th workr ffort. Minitry might b analogou to th Minitry of Financ in Jaan. Th Minitry of Financ till ha lnty of oortuniti for amakudari in th financial ctor. Candidat for duty minitr oition ar uually lctd quit arly. Somtim thir firt job in th Minitry (or thir xamination rcord i conidrd a a vry imortant ignal for thir futur romotion. Th maintram job ar tho in th udgt urau in which vry candidat for a duty minitr ot hould work vral tim in hi carr. Sinc mot of th carr rout of a fat-track MoF official ar vry ath-dndnt it i rlativly ay to rojct hi futur carr ath givn hi carr hitory. Howvr vn lor in carr comtition till hav a trong incntiv to mov u to a highr job lvl inc th diffrnc in th riz availabl to lor

33 ar qually larg and thir marginal rturn ar thu high. On th othr hand Minitry could b aociatd with MITI (th Minitry of Intrnational Trad and Indutry currntly MTI Minitry of conomy Trad and Indutry. Mot indutri (manufacturing which MITI urvi hav bn d-rgulatd MITI ha mallr rnt hard with th rivat ctor and thu fwr oortuniti of amakudari than MoF. Comard with MoF it i oftn aid that MITI lction roc i lowr and mor uncrtain. round th fiftnth yar of thir carr candidat for duty minitr ar rducd by half (to about tn. Howvr aftr that thr i no xlicit goldn rout to bcom a duty minitr xct for a fw ot at th vry latt tag. Thu comtition for a duty minitr in MITI i likly to b tratgically ambiguou in ordr to k incntiv vry high until th lat minut of final romotion. 4 Concluding rmark In thi ar w hav rntd th ath-dndnc modl for fat-track Jaan buraucrat cially focuing on it incntiv mchanim. Without a rformanc bad ay chm th ath dndnt modl can giv an incntiv to work hard and win good romotion to a workr by linking th rank of hi final job to th riz. In articular th baic ath dndnt modl with qual riz rad can induc th am lvl of ffort at vry job ot and vn lor continu to mak thir ffort to gt highr riz within thir oortuniti.

34 w hav n minitri with l amakudari oortuniti might adot chm without rvaling th job oition of workr (or th roct of thir riz to thm. Such tratgi can incra th lvl of ffort givn th xctd riz it hould ay but rduc th wlfar of workr (nt bnfit or rnt for workr and fail to attract qualifid workr. Thu minitri with lnty amakudari oortuniti may not want to adot th non-rvaling tratgi vn if thy can furthr incra th workr ffort lvl. Th arrangmnt hav uccfully rovidd a trong incntiv to work hard for good romotion to fat-track govrnmnt official. Undr th ath-dndnt carr modl a workr who continu to b romotd to a good job at vry t hould bcom duty minitr. Indd it i vry common that minitri hav a ri of o calld maintram job (ot which mot to official hav xrincd in thir romotion roc. Thu a good workr who i n a a candidat for a futur high-ranking ot hould hav xrincd a ri of good job calld main tram. Howvr th vry buraucratic romotion rul n in th carr ath dndnt modl may not work whn th conomic circumtanc urrounding govrnmnt chang vry raidly. Th good rutation of a workr which ha bn givn to him by at tandard (carr ath may not b rlvant to an ability to co with currnt or futur difficulti. Thi imli that in uch a ituation th ath-dndnt romotion ytm might lad to human rourc miallocation. In thi n th lction at th to of a diffrnt ty ha rcntly occurrd in om

35 minitri. For xaml th candidat that wa xctd to b chon a duty minitr of th MOF wa not lctd in th lat romotion xrci undr th influnc of om candal rvailing th financial world. Rutation judgd by at tandard might not b a uful rfrnc for fat-track buraucrat in a changing nvironmnt. In addition rgulatory rnt or amakudari oortuniti ar xctd to dclin in futur. Futur riz will thu hav l imact on incntiv in th abnc of a rformanc bad ay chm. Thi imli that incntiv for fat-track official to work hard may no longr b guarantd. 4

36 ndix: Comtition and co-oration: Th rol of th-am-yar rcruit Th rol of th am yar rcruit (comtition among a mall numbr of homognou articiant could giv om rlvanc to th tournamnt modl combind with th following co-oration rul among thm. In thi andix w conidr comtition and co-oration among th-am-yar rcruit in th contxt of th tournamnt modl. Th tournamnt modl rdict that comtition among limitd and homognou mmbr induc mor ffort by th mmbr but will alo hav a ngativ ffct on co-oration among thm (Lazar (989. Th niority bad job rank and wag ytm can nhanc co-orativ bhaviour during th arlir carr tag. Howvr onc th lction roc ha tartd dirct comtition among th mmbr might b fircr and thu mak co-oration and tam work mor difficult. To rvnt th otntial roblm om commntator tr th following imlicit rul among fat-track govrnmnt official (.g.kawakita (999 in Jaan. Only if th total rformanc of th grou i ufficintly good will th grou b conidrd to b comtnt a a whol and a duty minitr will b lctd from thi grou. duty minitr uually ha a larg margin of manouvr to allocat cond job to rtird official and h k uch a owr vn aftr hi rtirmnt. Thu if a grou cannot roduc a duty minitr th roct of all mmbr for thir cond or third ot-rtirmnt job would b much wor. Thi fatur can clarly nhanc co-oration among th mmbr of th am-yar grou. 5

37 6 In ordr to conidr uch an imlicit rul for co-oration lt u rconidr th tournamnt modl with two homognou workr and. Th workr that win th tournamnt gt th riz of. Following th tratmnt of Lazar (989 w introduc abotag activity ( and u th am notation a in Sction. ( ( 0 u t t N u u c c c u x u x σ Workr maximiation roblm i ( ( ( S c win ob Max P r Th firt ordr condition ar ymmtric and w obtain th following rult a hown by Lazar (989. ( ( ( ( 0 0 c g c g whr ( g i th dnity function on th random variabl u and u ( 0 ( u N u u σ.

38 To olv th firt ordr condition xlicitly w introduc a quadratic cot function c (. c ( a b b b ( a > 0 Th valu of a (a c c i aumd to b oitiv thu th marginal cot of making an ffort (a abotag activity incra with th lvl of a abotag activity (an ffort. Thi aumtion i common in th multitak litratur (.g. Holmotrom and Milgrom (99 rago and Garvy (998. Th firt ordr condition ar rwrittn a follow. ( c ( a b g 0 ( ( c ( a b g 0 ( um that < a < g( 0 > b and. 0. Thn w can gt oitiv quilibrium valu of a ( g ( 0 b a b a a ( g ( 0 b Nxt w introduc a nalty for abotag bhaviour. Th comtnc of th air of and might dnd on th xtnt to which thy minimi thir abotag activiti. Thu th riz (th oortuniti of amakudari can b rducd by th um of thir abotag activiti (multilid by a contant (k> 0 from th initial lvl with no abotag activity. Workr maximiation roblm i 7

39 8 ( ( ( ( ( a c k win ob Max P r Th firt ordr condition ar ( ( ( ( c k P k P c k P k P In a Nah ymmtry quilibrium ( ( P g P g P Thu th firt ordr condition ar rwrittn a follow. ( 0 ( kg a k b g ( ( 0 ( a kg k b g ( Whn w add both quation w hav a b Thu a nw quilibrium ( i alo on that lin (Figur 5. Sinc k >0

40 > < y introducing a nalty for abotag activiti (a rduction in th total amount of th riz workr rduc th lvl of thir abotag activiti and thu incra that of thir ffort. 9

41 Rfrnc oki M. (988 Information incntiv and bargaining in th Jaan conomy Cambridg Univrity Pr Fairburn J. and J. Malcomon (00 Prformanc romotion and th Ptr rincil Rviw of conomic Studi 68( Gibbon R. (997 Incntiv and carr in organization in. Kr and K. Walli d. dvanc in conomic thory and conomtric Cambridg Univrity Pr Gibbon R. and M. Waldman (999 Carr in organization: Thory and vidnc in O. hnfltr and. Card d. Handbook of labor conomic olum North Holland Gibb M. (995 Incntiv comnation in a cororat hirarchy Journal of ccounting and conomic Hahimoto M. and J. Raiian (985 mloymnt tnur and arning rofil in Jaan and th Unitd Stat mrican conomic Rviw Kato T. and M. Rockl (99 xrinc crdntial and comnation in th Jaan and U.S. managrial labor markt: vidnc from nw micro data Journal of th Jaan and Intrnational conomi Itoh H. (994 Jaan human rourc managmnt from th viwoint of incntiv thory in M. oki and R. or d. Th Jaan firm: Sourc of comtitiv trngth Oxford Univrity Pr Koik K. (988 Undrtanding indutrial rlation in modrn Jaan Macmillan Pr Lazar. (979 Why i thr mandatory rtirmnt? Journal of Political conomy Lazar. (989 Pay quality and indutrial olitic Journal of Political conomy 40

42 Lazar. (995 Pronnl conomic MIT Pr Lazar. (998 Pronnl conomic for managr Wily MacLod W. and J. Malcomon (989 Imlicit contract incntiv comatibility and involuntary unmloymnt conomtrica Milgrom P. and J. Robrt (988 n conomic aroach to influnc activiti in organization mrican Journal of Sociology 94 S54-S79 OC (99 mloymnt Outlook OC Prndrgat C. (99 Carr dvlomnt and cific human caital collction Journal of th Jaan and intrnational conomi Prndrgat C. (99 Th rol of romotion in inducing cific human caital acquiition Quartrly Journal of conomic Prndrgat (999 Th roviion of incntiv in firm Journal of conomic Litratur 7( 7-6 Prndrgat and Tol (996 Favoritim in Organization Journal of Political conomy 04( Turu K. (996 Th Jaan Markt conomy Sytm: It Strngth and Wakn LTC Intrnational Library Slction No. 4 LTC Intrnational Library Foundation 4

43 Figur Th carr ath-dndnt modl J ( n : J ( t t ( t J ( t - (t J ( t J ( t ( J ( t ( J ( t ( J ( t J ( t t t J ( n n : n tn 4

44 Figur chm with an qual riz rad ( C 4

45 Figur Th xtnt of ath dndnc in diffrnt modl ( arly lction ( > > 0 C C ( ( C( ( ( ( > ( > ( ( > 0 ( ( ( ( ( P( ( ( ( 4 44

46 ( Lat lction ( < < 0 C C ( ( C ( ( ( ( < ( < ( ( < 0 ( ( ( P ( ( ( 4 45

47 ( Lat lction with th mrit ytm C C ( m( ( m( ( ( ( ( ( < C m m m m ( m ( m ( T h t a n d a r d c a 4 46

48 (4 Lat lction with th dmrit ytm C C ( d ( ( d( ( ( ( ( ( C d d d < d ( d ( T h t a n d a r d c a d ( 4 47

49 Figur 4 Th oortunity of amakudari and diffrnt lction ytm ( Minitry : Otimal 4 J ( P a r t i c i a t i o n c o n t r a i n 48

50 ( Minitry (Schm 4 J ( P a r t i c i a t i o n c o n t r a i n 49

51 ( Minitry (Schm 4 J ( P a r t i c i a t i o n c o n t r a i n J ( No information 50

52 (4 Minitry (Schm 4 ( J ( P a r t i c i a t i o n c o n t r a i n J ( No information 5

53 Figur 5 Comtition and co -oration among th am yar rcruit b/(a b-g(0 ( ( ( ( ( ( b/(a g(0b 5