Promotions and incentives in partnerships: Evidence from major US law firms

This paper develops a model of promotions in partnerships and estimates the model using cross-sectional data on major U.S. law firms. Promotions to partner screen associates for firm-specific skills, and they generate tournament incentives among associates competing for promotions. The key parameters of the model are estimated by imposing the equilibrium restriction that firms offer equal utility to incoming associates. The incentive component of compensation is found to be statistically significant, and a nested model without promotion incentives is rejected by the data.