Insurance Between Firms: The Role of Internal Labor Markets

Giacinta Cestone, Chiara Fumagalli, Francis Kramarz () and Giovanni Pica
Additional contact information
Giacinta Cestone: Cass Business School, CSEF and ECGI
Chiara Fumagalli: Università Bocconi, CSEF and CEPR

No 397, Development Working Papers from Centro Studi Luca d'Agliano, University of Milano

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 affiliated 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 (search for similar items in EconPapers)
JEL-codes: G30 J08 J40 L22 (search for similar items in EconPapers)
Pages: 61
Date: 2016-06-20, Revised 2020-01-21
New Economics Papers: this item is included in nep-ias and nep-lma
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Citations: View citations in EconPapers (5)

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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 (2017)
Working Paper: Insurance Between Firms: The Role of Internal Labor Markets (2016)
Working Paper: Insurance Between Firms: The Role of Internal Labor Markets (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:csl:devewp:397

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