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Internal labor markets: A worker flow approach

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  • Huitfeldt, Ingrid
  • Kostøl, Andreas R.
  • Nimczik, Jan
  • Weber, Andrea

Abstract

This paper develops a new method to study how workers’ career and wage profiles are shaped by internal labor markets (ILM) and job hierarchies in firms. We tackle the conceptual challenge of organizing jobs within firms into hierarchy levels by proposing a data-driven ranking method based on observed worker flows between occupations within firms. We apply our method to linked employer–employee data from Norway that record fine-grained occupational codes and track contract changes within firms. Our findings confirm existing evidence that is primarily based on case studies for single firms. We expand on this by documenting substantial heterogeneity in the structure and hierarchy of ILMs across a broad range of large firms. Our findings on wage and promotion dynamics in ILMs are consistent with models of careers in organizations.

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  • Huitfeldt, Ingrid & Kostøl, Andreas R. & Nimczik, Jan & Weber, Andrea, 2023. "Internal labor markets: A worker flow approach," Journal of Econometrics, Elsevier, vol. 233(2), pages 661-688.
    • Handle: RePEc:eee:econom:v:233:y:2023:i:2:p:661-688
    DOI: 10.1016/j.jeconom.2021.12.016
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    Cited by:

    1. Katrin Huber & Geske Rolvering, 2023. "Public child care and mothers’ career trajectories," Working Papers 228, Bavarian Graduate Program in Economics (BGPE).
    2. Monica Costa Dias & Ella Johnson-Watts & Robert Joyce & Fabien Postel-Vinay & Peter Spittal & Xiaowei Xu, 2021. "Worker mobility and labour market opportunities," IFS Working Papers W21/29, Institute for Fiscal Studies.
    3. Huber, Katrin & Rolvering, Geske, 2023. "Public Child Care and Mothers' Career Trajectories," IZA Discussion Papers 16433, Institute of Labor Economics (IZA).
    4. Luca Coraggio & Marco Pagano & Annalisa Scognamiglio & Joacim Tåg, 2022. "JAQ of All Trades: Job Mismatch, Firm Productivity and Managerial Quality," EIEF Working Papers Series 2205, Einaudi Institute for Economics and Finance (EIEF), revised Mar 2022.
    5. Ingrid Haegele, 2022. "Talent Hoarding in Organizations," Papers 2206.15098, arXiv.org, revised Mar 2024.

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    More about this item

    Keywords

    Internal labor markets; Organization of labor; Wage setting;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion
    • M5 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics

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