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Employment Adjustments on the Internal and External Labour Market: An Empirical Study with Personnel Records of a German Company

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  • Gerlach, Knut
  • Hübler, Olaf

Abstract

Firms are affected by the product demand. This leads to employment adjustments. In the literature we find only very few contributions investigating the issue whether internal adjustments are linked and which relationships exist with external adjustments. Are they of a complementary or substitutive nature? Furthermore, it is of interest to find out, whether we can observe an obvious trend and whether the adjustments are driven by cyclical movements. For this study we have an extensive data set of a large German manufacturing company, which supplies innovative products for the domestic and international market, provided on a monthly base from January 1999 to December 2005. The empirical analysis starts with descriptive statistics. We find that the employment adjustment cycle coincides only to a certain degree with the macroeconomic cycle. Internal and external adjustments are more characterized by complementarity than by substitution. Over the observed period we cannot detect analogous wage adjustments. It is noticeable that in 2003 compared with the years before the number of employees is substantially reduced. The econometric investigation is based on a two-stage approach. We start with a bivariate probit estimation in order to extract the relationship between the probability of overtime and of promotion. Unobserved variables have opposite effects on the former and the latter adjustment instrument. Furthermore, we detect a negative trend of internal employment adjustments. Cyclical effects are ambiguous. The next step, the determination of external adjustments with respect to overtime and promotion adjustments, is split into two estimates. On the one hand we do not distinguish between the type of external employment adjustment and on the other hand we use this information separating between quits, layoffs, workers with a cancellation agreement and with a transition into a transfer organisation. The first approach demonstrates that a promotion reduces the probability to leave the firm while overtime is positively associated with an external job change. This pattern holds generally speaking in the second, more detailed estimates. Quits are the exception. In this case we observe opposite effects. Finally, we cannot detect any influences of promotions on cancellation agreements. --

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Bibliographic Info

Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 08-133.

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Date of creation: 2008
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Handle: RePEc:zbw:zewdip:7523

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Keywords: Personnel records; overtime; promotion; job mobility; cancellation agreement; transfer organisation;

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  1. Christian Pfeifer, 2010. "Determinants of Promotions in an Internal Labour Market," Schmalenbach Business Review (sbr), LMU Munich School of Management, vol. 62(4), pages 342-358, October.
  2. Knoppik, Christoph & Beissinger, Thomas, 2001. "How Rigid are Nominal Wages? Evidence and Implications for Germany," IZA Discussion Papers 357, Institute for the Study of Labor (IZA).
  3. Olsen, Randall J, 1980. "A Least Squares Correction for Selectivity Bias," Econometrica, Econometric Society, vol. 48(7), pages 1815-20, November.
  4. Pierre Cahuc & André Zylberberg, 2004. "Labor Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 026203316x, December.
  5. Wolfgang Franz & Friedhelm Pfeiffer, 2003. "Zur ökonomischen Rationalität von Lohnrigiditäten aus der Sicht von Unternehmen," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 223(1), pages 23-57.
  6. Schlicht, Ekkehart, 1998. "On Custom in the Economy," OUP Catalogue, Oxford University Press, number 9780198292241.
  7. Laura Giuliano & David I. Levine & Jonathon Leonard, 2006. "An Analysis of Quits, Dismissals, and Promotions at a Large Retail Firm," Working Papers 0721, University of Miami, Department of Economics.
  8. Giuliano, Laura & Levine, David I. & Leonard, Jonathan, 2006. "Do Race, Age, and Gender Differences Affect Manager-Employee Relations? An Analysis of Quits, Dismissals, and Promotions at a Large Retail Firm," Institute for Research on Labor and Employment, Working Paper Series qt9tc8n5j7, Institute of Industrial Relations, UC Berkeley.
  9. Cornelissen, Thomas & Huebler, Oloaf, 2006. "Downward Wage Rigidity and Job Mobility," Hannover Economic Papers (HEP) dp-349, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
  10. Olaf Huebler, 2005. "Sind betriebliche Bündnisse für Arbeit erfolgreich?," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 225(6), pages 630-652, November.
  11. Newey, Whitney K., 1999. "Consistency of two-step sample selection estimators despite misspecification of distribution," Economics Letters, Elsevier, vol. 63(2), pages 129-132, May.
  12. Michael Gibbs & Wallace Hendricks, 2004. "Do formal salary systems really matter?," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 58(1), pages 71-93, October.
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