A Theory of Careers in Hierarchical Internal Labor Markets

The paper develops a model that explains a broad pattern of evidence on careers in multilevel organizations. It shows how job mobility inside firms depends on changes in the size of the organization. Promotion rates rise (fall) during a corporate expansion (contraction). Economic conditions therefore affect individual career mobility and earnings profiles. The model analyzes how the interaction between human capital accumulation and learning impacts on the assignment of workers to jobs at different levels of authority in the corporate hierarchy. The model makes predictions about the timing of the provision of formal training.