Internal Promotion and External Recruitment: A Theoretical and Empirical Analysis

Jed DeVaro and Hodaka Morita ()

Journal of Labor Economics, 2013, vol. 31, issue 2, 227 - 269

Abstract: We present a theoretical and empirical analysis of internal promotion versus external recruitment, using a job-assignment model involving competing firms with heterogeneous productivities and two-level job hierarchies with one managerial position. The model predicts that, controlling for the number of managers, increasing the number of lower-level workers is associated with (1) greater internal promotion as opposed to external recruitment, (2) higher profit, and (3) more general training. Empirical analysis of a large cross section of British employers is consistent with these predictions.

Date: 2013
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