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The Prevalence of Internal Labour Markets - New Evidence from Panel Data


  • Eriksson, Tor

    () (Department of Economics, Aarhus School of Business)

  • Werwatz, Axel

    (Humboldt University, Berlin)


In recent years, a small but growing literature concerned with the empirical analysis of the workings of internal labour markets has emerged. These studies, which have almost exclusively been based on personnel records data from single firms, notably Lazear (1992) and Baker, Gibbs and Holmström (1994), have begun to provide some empirical evidence on many of the issues raised by the primarily theoretical field of personnel economics. Instead of one further single firm study, this paper uses an employer-employee linked data set based on 222 Danish private sector, medium-sized or large firms during the period 1980 to 1995. The principal aim of the study is to look for evidence of internal labour markets by focussing on whether there are stable careers, whether being an incumbent has advantages for one’s subsequent career, and on to what extent and how wages are set within the firm. We also examine the influence of the external labour market on wage setting within firms. The data set allows us to examine whether firms differ, and if so, if there are industry-specific differences or differences between growing, stable, and declining firms. Moreover, our study provides insights different from those of earlier work by comparing the internal labour markets of managerial employees with those of the much less studied non-managerial workers

Suggested Citation

  • Eriksson, Tor & Werwatz, Axel, 2005. "The Prevalence of Internal Labour Markets - New Evidence from Panel Data," Working Papers 04-19, University of Aarhus, Aarhus School of Business, Department of Economics.
  • Handle: RePEc:hhs:aareco:2004_019 Note: Published in: International Journal of Economics Research, 2005 (2), 1-20

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    References listed on IDEAS

    1. Franses, Philip Hans, 1996. "Periodicity and Stochastic Trends in Economic Time Series," OUP Catalogue, Oxford University Press, number 9780198774549.
    2. Hylleberg, S. & Engle, R. F. & Granger, C. W. J. & Yoo, B. S., 1990. "Seasonal integration and cointegration," Journal of Econometrics, Elsevier, vol. 44(1-2), pages 215-238.
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    Cited by:

    1. Francesca Sgobbi & Fátima Suleman, 2015. "The Value of Transferable Skills," Scottish Journal of Political Economy, Scottish Economic Society, vol. 62(4), pages 378-399, September.
    2. Oberst, Mathias & Schank, Thorsten & Schnabel, Claus, 2006. "Interne Arbeitsmärkte und Einsatz temporärer Arbeitsverhältnisse : Eine Fallstudie mit Daten eines deutschen Dienstleistungsunternehmens," Discussion Papers 46, Friedrich-Alexander University Erlangen-Nuremberg, Chair of Labour and Regional Economics.
    3. Xin Jin, 2014. "The Signaling Role of Not Being Promoted: Theory and Evidence," Working Papers 0314, University of South Florida, Department of Economics.
    4. Jin, Xin, 2014. "The Signaling Role of Note Being Promoted: Theory and Evidence," MPRA Paper 58484, University Library of Munich, Germany.

    More about this item


    Internal labour markets; Careers; Promotions; Firms’ wage structures;

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J40 - Labor and Demographic Economics - - Particular Labor Markets - - - General
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts

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