Internal Labor Markets in Equilibrium

Timothy N. Bondtn
Authors registered in the RePEc Author Service: Timothy N. Bond

The Journal of Law, Economics, and Organization, 2017, vol. 33, issue 1, 28-67

Abstract: Traditional models of promotion have difficulty explaining why many firms do not favor internal employees for advancement. I develop a new model to explain this phenomenon. My model generates an equilibrium where some, but not all, ex ante identical firms recruit strictly internally. These firms employ higher quality entry-level workers, since they hire supervisors exclusively from their lower ranks. The scarcity of high-quality workers limits the use of this strategy. I derive several testable predictions on wage-tenure profile differences across firms with varying recruitment practices and confirm these predictions using matched employer–employee data from the United Kingdom. (JEL M50, J31)

JEL-codes: J31 M50 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Internal Labor Markets in Equilibrium (2015)
Working Paper: Internal Labor Markets in Equilibrium (2015)
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