Internal Labour Markets: Causes and Consequences
The paper analyzes the causes and consequences of internal labor market rules that yield long tenure promotion from within, seniority, pensions, and "due process" in dismissals. About half the workforce are estimated to be in such markets. Competitive reasons for internal labor markets as a response to specific training and arms-length relationships between workers and firms are surveyed. These reasons are found to be consistent with the pattern of internal labor markets among non-union firms. However, some internal labor markets, (e.g. among small unionized firms) are probably a response to union pressure and government regulations. In these circumstances, low labor mobility could pose problems for policy. Copyright 1991 by Oxford University Press.
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