Transactions Costs and Internal Labor Markets

Sherwin Rosen

No 2407, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The concept of transactions costs used by Coase in "The Nature of the Firm" is applied to the internal labor market of an organization. Under joint production it is shown that the number of transaction-specific prices necessary to decentralize labor allocations rises geometrically with the size of the work force. Complexity of calculation and costs of implementation constrains the possibilities for internal decentralization through a price mechanism and substitutes a more authoritarian system of allocation instead. These same issues of complexity and implementation costs limit the usefulness of agency theory as a conceptual framework for this problem. The analysis suggests that an internal labor market must be viewed in a more comprehensive framework of a personnel management system.

Date: 1987-10
Note: LS
References: View references in EconPapers View complete reference list from CitEc
Citations:

Published as Rosen, Sherwin. "Transactions Costs and Internal Labor Markets." Journal of Law, Economics, and Organization, Vol. 4, No. 1, (Spring 1988), pp. 49-64.

Downloads: (external link)
http://www.nber.org/papers/w2407.pdf (application/pdf)

Related works:
Journal Article: Transactions Costs and Internal Labor Markets (1988)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:2407

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w2407

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().