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Insurance Between Firms: The Role of Internal Labor Markets

Author

Listed:
  • Giacinta Cestone
  • Chiara Fumagalli
  • Francis Kramarz
  • Giovanni Pica

Abstract

We investigate how Internal Labor Markets (ILMs) allow organizations to accommodate shocks calling for costly labor adjustments. Using data on workers' mobility within French business groups, we find that adverse shocks affecting affliated firms boost the proportion of workers redeployed to other group units rather than external firms. This effect is stronger when labor regulations are stricter and destination-firms are more efficient or enjoy better growth opportunities. Affiliated firms hit by positive shocks rely on the ILM for new hires, especially high-skilled workers. Overall, ILMs emerge as a co-insurance mechanism within organizations, providing job stability to employees as a by-product. Keywords: Internal Labor Markets, Organizations, Business Groups JEL Classification: G30, L22, J08, J40

Suggested Citation

  • Giacinta Cestone & Chiara Fumagalli & Francis Kramarz & Giovanni Pica, 2016. "Insurance Between Firms: The Role of Internal Labor Markets," Working Papers 582, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  • Handle: RePEc:igi:igierp:582
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    References listed on IDEAS

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    Cited by:

    1. P. Charnoz & C. Lelarge & C. Trevien, 2017. "Communication Costs and the Internal Organization of Multi-Plant Businesses: Evidence from the Impact of the French High-Speed Rail," Working papers 635, Banque de France.
    2. Nimczik, Jan Sebastian, 2017. "Job Mobility Networks and Endogenous Labor Markets," Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168147, Verein für Socialpolitik / German Economic Association.
    3. Giacinta Cestone & Chiara Fumagalli & Francis Kramarz & Giovanni Pica, 2017. "Insurance Between Firms: The Role of Internal Labor Markets," Working Papers 2017-89, Center for Research in Economics and Statistics.
    4. Giovanna Nicodano & Luca Regis, 2017. "A Trade-off Theory of Ownership and Capital Structure," Working papers 045, Department of Economics and Statistics (Dipartimento di Scienze Economico-Sociali e Matematico-Statistiche), University of Torino.

    More about this item

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies
    • J40 - Labor and Demographic Economics - - Particular Labor Markets - - - General

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