Large Firms and Internal Labor Markets
This paper introduces a model of internal labor markets that is consistent with the observed differences between workers in large and small firms with respect to wages and separation rates. In particular, firms constitute labor markets with no search frictions. Workers are free to move within a firm at no cost, whereas switching across firms is costly. If the quality of a match between a worker and a occupation/department/team within a firm is uncertain, then larger firms offer more opportunities for workers to find the right match. As a result, workers abandon unpromising matches more easily and are more likely to be employed in better matches. In equilibrium, workers in larger firms are more productive, earn higher wages and are less likely to quit, even conditional on their wage. Using data from the 1996 SIPP we find support for the predictions of our framework: internal mobility is higher in larger firms and depends negatively on wages and tenure; workers in larger firms switch occupations at higher wage levels and receive higher wages in their new occupation; the size-wage premium is higher for workers with longer tenure, while workers who leave large firms continue to enjoy high wages, but only if they remain in the same occupation; and finally the wage and size effects on the separation probability are significantly larger for workers who switch occupations.
|Date of creation:||2010|
|Date of revision:|
|Contact details of provider:|| Postal: Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA|
Web page: http://www.EconomicDynamics.org/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Theodore Papageorgiou, 2009. "Learning Your Comparative Advantages," 2009 Meeting Papers 1150, Society for Economic Dynamics.
- Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, March.
- Moore, Henry Ludwell, 1911. "Laws of Wages: An essay in statistical economics," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, number moore1911.
- Theodore Papageorgiou, 2014. "Learning Your Comparative Advantages," Review of Economic Studies, Oxford University Press, vol. 81(3), pages 1263-1295.
- Jovanovic, Boyan, 1979.
"Job Matching and the Theory of Turnover,"
Journal of Political Economy,
University of Chicago Press, vol. 87(5), pages 972-90, October.
- Mortensen, Dale & Pissarides, Christopher, 2011.
"Job Creation and Job Destruction in the Theory of Unemployment,"
Russian Presidential Academy of National Economy and Public Administration, vol. 1, pages 19 pages.
- Dale T. Mortensen & Christopher A. Pissarides, 1994. "Job Creation and Job Destruction in the Theory of Unemployment," Review of Economic Studies, Oxford University Press, vol. 61(3), pages 397-415.
- Dale T. Mortensen & Christopher A. Pissarides, 1993. "Job Creation and Job Destruction in the Theory of Unemployment," CEP Discussion Papers dp0110, Centre for Economic Performance, LSE.
- Maury Gittleman & Michael Horrigan & Mary Joyce, 1998. "â€œFlexibleâ€ Workplace Practices: Evidence from a Nationally Representative Survey," ILR Review, Cornell University, ILR School, vol. 52(1), pages 99-115, October.
- Jaime Ortega, 2001. "Job Rotation as a Learning Mechanism," Management Science, INFORMS, vol. 47(10), pages 1361-1370, October.
- Giuseppe Moscarini, 2005. "Job Matching and the Wage Distribution," Econometrica, Econometric Society, vol. 73(2), pages 481-516, 03.
When requesting a correction, please mention this item's handle: RePEc:red:sed010:1216. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christian Zimmermann)
If references are entirely missing, you can add them using this form.