Insurance Between Firms: The Role of Internal Labor Markets

Chiara Fumagalli, Giacinta Cestone, Francis Kramarz () and Giovanni Pica

No 11336, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We investigate how internal labor markets (ILMs) allow business groups to accommodate positive and negative shocks calling for labor adjustments. Group-affiliated units faced with positive shocks rely on the ILM for new hires, especially managers and other high-skilled workers, thus overcoming human capital bottlenecks that may curb growth. Adverse shocks affecting one unit in the organization increase workers' mobility to other units rather than external firms, with stricter employment protection causing an additional increase in internal mobility. ILMs emerge as a co-insurance mechanism, allowing organizations to bypass firing and hiring frictions and providing job stability to employees as a by-product.

Keywords: Internal labor markets; Business groups; Co-insurance (search for similar items in EconPapers)
JEL-codes: G30 J08 J40 L22 (search for similar items in EconPapers)
Date: 2016-06
New Economics Papers: this item is included in nep-ias, nep-lma and nep-net
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (22)

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Related works:
Working Paper: Insurance Between Firms: The Role of Internal Labor Markets (2020)
Working Paper: Insurance Between Firms: The Role of Internal Labor Markets (2020)
Working Paper: Insurance Between Firms: The Role of Internal Labor Markets (2017)
Working Paper: Insurance Between Firms: The Role of Internal Labor Markets (2016)
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