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Internal Promotion and External Recruitment: A Theoretical and Empirical Analysis

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  • Jed DeVaro
  • Hodaka Morita

Abstract

We present a theoretical and empirical analysis of internal promotion versus external recruitment, using a job-assignment model involving competing firms with heterogeneous productivities and two-level job hierarchies with one managerial position. The model predicts that, controlling for the number of managers, increasing the number of lower-level workers is associated with (1) greater internal promotion as opposed to external recruitment, (2) higher profit, and (3) more general training. Empirical analysis of a large cross section of British employers is consistent with these predictions.

Suggested Citation

  • Jed DeVaro & Hodaka Morita, 2013. "Internal Promotion and External Recruitment: A Theoretical and Empirical Analysis," Journal of Labor Economics, University of Chicago Press, vol. 31(2), pages 227-269.
    • Handle: RePEc:ucp:jlabec:doi:10.1086/667814
    DOI: 10.1086/667814
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