When Losers Become Leavers: Rejection and Turnover in Internal Labor Markets

Large Firms and Internal Labor Markets

This paper introduces a model of internal labor markets that is consistent with the observed differences between workers in large and small firms with respect to wages and separation rates. In particular, firms constitute labor markets with no search frictions. Workers are free to move within a firm at no cost, whereas switching across firms is costly. If the quality of a match between a worker...

Managers, Mentoring, and Internal Labor Markets

We propose a theory of production and allocation of human capital in firms that focuses on the role of line managers, who both invest time to mentor junior employees, and acquire information about the juniors’abilities that is valuable for job assignments. We argue that this dual role of managers implies that internal labor markets and incentive contracts for managers must be determined jointly...

Internal Labor Markets and Manpower Analysis

Optimal Investment in Incomplete Markets when Wealth may Become Negative

This paper accompanies a previous one [KS99] by D. Kramkov and the present author. While in [KS99] we considered utility functions U : R+ → R satisfying the Inada conditions U ′(0) = ∞ and U ′(∞) = 0, in the present paper we consider utility functions U : R → R which are finitely valued, for all x ∈ R, and satisfy U ′(−∞) =∞ and U ′(∞) = 0. A typical example of this situation is the exponential...

Market Frictions and the Competitive Advantage of Internal Labor Markets

We show that frictions in labor and capital markets can be a source of competitive advantage for a¢ liates of corporate groups over standalone …rms in environments where bene…ts from internal markets’‡exibility are high. We argue that the advantage of ‡exibility in changing labor inputs is related to how di¢ cult it is to change capital inputs. We predict that if substituting labor with capital...