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Internal labour markets: a case study

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  • Lima, Francisco

Abstract

We select one firm from a large data set of firms and study its internal economics. First we prove that the information available allows us to inspect the personnel policies of the firm. Furthermore, this fact allows moving from the case study to more comprehensive studies in personnel economics using institutional surveys. The analysis also shows the patterns of workers' promotions and the differences in the characteristics of insider versus outsider workers. The decision to promote is analyzed. The hierarchic design directly influences the wage policy. Wages are determined to a great extent by the layers of the hierarchy. There are wage premiums upon promotion, even if the worker does not change his place in the organization. When the promoted worker moves up in the hierarchy he comes from the top of the wage distribution at the old job and goes to the bottom of it in the new job. We present evidence on workers' exit and entry to the bottom of the wage distribution, especially in the lower part of the hierarchy.

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File URL: http://fesrvsd.fe.unl.pt/WPFEUNL/WP2000/wp378.pdf
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Bibliographic Info

Paper provided by Universidade Nova de Lisboa, Faculdade de Economia in its series FEUNL Working Paper Series with number wp378.

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Length: 41 pages
Date of creation: 2000
Date of revision:
Handle: RePEc:unl:unlfep:wp378

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Web page: http://www.fe.unl.pt

Related research

Keywords: Internal labor market; personnel economics; hierarchy;

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References

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  1. Ariga, Kenn & Brunello, Giorgio & Ohkusa, Yasushi, 1997. "Fast Track: Is it in the Genes? The Promotion Policy of a Large Japanese Firm," CEPR Discussion Papers 1622, C.E.P.R. Discussion Papers.
  2. Lazear, Edward P & Rosen, Sherwin, 1981. "Rank-Order Tournaments as Optimum Labor Contracts," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 841-64, October.
  3. Milgrom, Paul & Oster, Sharon, 1987. "Job Discrimination, Market Forces, and the Invisibility Hypothesis," The Quarterly Journal of Economics, MIT Press, vol. 102(3), pages 453-76, August.
  4. Chan, William, 1996. "External Recruitment versus Internal Promotion," Journal of Labor Economics, University of Chicago Press, vol. 14(4), pages 555-70, October.
  5. Medoff, James L & Abraham, Katharine G, 1980. "Experience, Performance, and Earnings," The Quarterly Journal of Economics, MIT Press, vol. 95(4), pages 703-36, December.
  6. McCue, Kristin, 1996. "Promotions and Wage Growth," Journal of Labor Economics, University of Chicago Press, vol. 14(2), pages 175-209, April.
  7. Ricart i Costa, Joan E, 1988. "Managerial Task Assignment and Promotions," Econometrica, Econometric Society, vol. 56(2), pages 449-66, March.
  8. Baker, George & Gibbs, Michael & Holmstrom, Bengt, 1993. "Hierarchies and compensation: A case study," European Economic Review, Elsevier, vol. 37(2-3), pages 366-378, April.
  9. Michael Waldman, 1984. "Job Assignments, Signalling, and Efficiency," RAND Journal of Economics, The RAND Corporation, vol. 15(2), pages 255-267, Summer.
  10. Manove, Michael, 1997. "Job Responsibility, Pay and Promotion," Economic Journal, Royal Economic Society, vol. 107(440), pages 85-103, January.
  11. Edward P. Lazear, 1999. "Personnel Economics: Past Lessons and Future Directions," NBER Working Papers 6957, National Bureau of Economic Research, Inc.
  12. Bernhardt, Dan, 1995. "Strategic Promotion and Compensation," Review of Economic Studies, Wiley Blackwell, vol. 62(2), pages 315-39, April.
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Cited by:
  1. Dohmen, Thomas & Kriechel, Ben & Pfann, Gerard A., 2003. "Monkey Bars and Ladders: The Importance of Lateral and Vertical Job Mobility in Internal Labor Market Careers," IZA Discussion Papers 867, Institute for the Study of Labor (IZA).

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