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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; ECGI
Chiara Fumagalli: Università Bocconi; CSEF; CEPR

No 2017-89, Working Papers from Center for Research in Economics and Statistics

Abstract: We investigate how internal labor markets (ILMs) allow business groups to accommodate positive and negative shocks calling for labor adjustments. Group-affliated 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: Labor Market Frictions; Internal Labor Reallocation; Business Groups (search for similar items in EconPapers)
JEL-codes: G30 L22 J20 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-hrm
Date: 2017-09-14
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Related works:
Working Paper: Insurance Between Firms: The Role of Internal Labor Markets (2017) Downloads
Working Paper: Insurance Between Firms: The Role of Internal Labor Markets (2016) Downloads
Working Paper: Insurance Between Firms: The Role of Internal Labor Markets (2016) Downloads
Working Paper: Insurance Between Firms: The Role of Internal Labor Markets (2016) Downloads
Working Paper: Insurance Between Firms: The Role of Internal Labor Markets (2016) Downloads
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