Rat Race Redux: Adverse Selection in the Determination of Work Hours in Law Firms

Abstract

This paper describes an organizational setting in which professional employees are required to work inefficiently long hours. The focus of the authors' investigation is large law firms. The income sharing that characterizes legal partnerships creates incentives to promote associates who have a propensity to work very hard. Law firms use indicators of this propensity--especially an associate's record of billable hours--in promotion decisions. Reliance upon work hours as an indicator leads to a rat-race equilibrium in which associates work too many hours. The authors find evidence in support of this conclusion with data they collected from two large law firms. Copyright 1996 by American Economic Association.

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