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The Rat Race and Internal Labor Markets

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Author Info
Hajime Miyazaki
Abstract

The labor market is viewed as a market for labor contracts. A firm is identified as having an internal labor market if the efficient mode of production requires that it employ heterogeneous worker types by offering a wage structure as a set of subsidizing contracts. If the firm is free to offer its choice of wage structures, and if the Wilson notion of equilibrium is considered, then certain irreducible combinations of wage-job contracts will obtain. Depending upon the distribution of worker types, wages in these equilibrium wage structures may not correspond to the marginal productivities of individual workers, but the firm breaks even because the wages of high productivity types subsidize low productivity types within the firm. The theoretical framework of our model is based on recent contributions to the theory of self-selection screening.

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Article provided by The RAND Corporation in its journal Bell Journal of Economics.

Volume (Year): 8 (1977)
Issue (Month): 2 (Autumn)
Pages: 394-418
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Handle: RePEc:rje:bellje:v:8:y:1977:i:autumn:p:394-418

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  1. Jeffrey M. Lacker, 1994. "Does adverse selection justify government intervention in loan markets?," Economic Quarterly, Federal Reserve Bank of Richmond, issue Win, pages 61-95. [Downloadable!]
  2. Bum J. Kim & Harris Schlesinger, 2004. "Adverse Selection in an Insurance Market with Government-Guaranteed Subsistence Levels," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
  3. John A. Weinberg, 1995. "The adverse selection approach to financial intermediation: some characteristics of the equilibrium financial structure," Working Paper 95-05, Federal Reserve Bank of Richmond. [Downloadable!]
  4. Michael Smart, 1996. "Competitive Insurance Markets with Two Unobservables," Working Papers msmart-96-01, University of Toronto, Department of Economics. [Downloadable!]
    Other versions:
  5. Giuseppe, DE FEO & Jean, HINDRIKS, 2005. "Efficiency of Competition in Insurance Markets with Adverse Selection," Université catholique de Louvain, Département des Sciences Economiques Working Paper 2005042, Université catholique de Louvain, Département des Sciences Economiques. [Downloadable!]
  6. Mathias Kifmann, 1999. "Community rating and choice between traditional health insurance and managed care," Health Economics, John Wiley & Sons, Ltd., vol. 8(7), pages 563-578.
  7. Amy Finkelstein, 2002. "When Can Partial Public Insurance Produce Pareto Improvements?," NBER Working Papers 9035, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  8. Martin Gaynor & William B. Vogt, 1999. "Antitrust and Competition in Health Care Markets," NBER Working Papers 7112, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  9. Ronel Elul, 2005. "Collateral, credit history, and the financial decelerator," Working Papers 05-23, Federal Reserve Bank of Philadelphia. [Downloadable!]
  10. Dwight Jaffee & Thomas Russell, 1995. "The Causes and Consequences of Rate Regulation in the Auto Insurance Industry," NBER Working Papers 5245, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  11. Belli, Paolo, 2001. "How adverse selection affects the health insurance market," Policy Research Working Paper Series 2574, The World Bank. [Downloadable!]
  12. Sophia Delipalla & Owen O'Donnell, 1999. "The Political Economy of a Publicly Provided Private Good with Adverse Selection," Studies in Economics 9911, Department of Economics, University of Kent. [Downloadable!]
  13. Joan E. Ricarti Costa, 1984. "Managerial Task Assignment and Promotions," Discussion Papers 595S, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
  14. Anjan V. Thakor & Gregory F. Udell, 2004. "An Economic Rationale for the Pricing Structure of Bank Loan Commitments," Finance 0411053, EconWPA. [Downloadable!]
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  15. Helmut Bester & Roland Strausz, 2003. "Contracting with Imperfect Commitment and Noisy Communication," Discussion Papers 2, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich. [Downloadable!]
    Other versions:
  16. Jeffrey M. Lacker & John A. Weinberg, 1994. "The coalition-proof core in adverse selection economies," Working Paper 94-09, Federal Reserve Bank of Richmond. [Downloadable!]
  17. Hellmuth Milde & John G. Riley, 1986. "Signalling in Credit Markets," UCLA Economics Working Papers 334, UCLA Department of Economics. [Downloadable!]
    Other versions:
  18. Amy Finkelstein & James Poterba & Casey Rothschild, 2006. "Redistribution by Insurance Market Regulation: Analyzing a Ban on Gender-Based Retirement Annuities," NBER Working Papers 12205, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  19. Liran Einav & Amy Finkelstein & Paul Schrimpf, 2007. "The Welfare Cost of Asymmetric Information: Evidence from the U.K. Annuity Market," NBER Working Papers 13228, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  20. Di Novi, Cinzia, 2008. "Adverse selection in the U.S. health insurance markets: Evidence from the MEPS," P.O.L.I.S. department's Working Papers 103, Department of Public Policy and Public Choice - POLIS. [Downloadable!]
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