Firm-Wide Versus Establishment-Specific Labor-Market Practices
Economists have devoted substantial effort to understanding why some productive activities are organized under the same firm, with the majority of empirical studies focusing on product or capital markets. Using a unique data set that links occupational data from separate establishments to the establishments’ ultimate beneficial owners, we are the first to study labor markets across establishments and across industries within large and diverse firms. We use these data to determine how wages and employment in firms’ different establishments and different industries are related. We first identify patterns in the wage and occupational profiles of the industries that multi-industry firms choose to enter. We then show there to be a substantial component of wage rates common to all establishments and all industries within individual firms, even after netting out industry and occupation effects. This demonstrates the extent that internal labor markets of large, multi-establishment, multi-industry firms are linked throughout their entire organizations. Finally, we show that employment changes tend to be localized within establishments, suggesting that demand or productivity shocks to an establishment do not permeate throughout the firm.
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- Kenneth R. Troske, 1998.
"Evidence on the Employer Size-Wage Premium From Worker-Establishment Matched Data,"
Labor and Demography
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3728, National Bureau of Economic Research, Inc.
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2870, National Bureau of Economic Research, Inc.
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NBER Working Papers
5499, National Bureau of Economic Research, Inc.
- Lamont, Owen, 1997. " Cash Flow and Investment: Evidence from Internal Capital Markets," Journal of Finance, American Finance Association, vol. 52(1), pages 83-109, March.
- Bronars, Stephen G & Famulari, Melissa, 1997. "Wage, Tenure, and Wage Growth Variation within and across Establishment," Journal of Labor Economics, University of Chicago Press, vol. 15(2), pages 285-317, April.
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- Kremer, Michael, 1993. "The O-Ring Theory of Economic Development," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 551-75, August.
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