Working Paper: CEPR ID: DP16434
Authors: Ingrid Huitfeldt; Andreas R. Kostl; Jan Sebastian Nimczik; Andrea Weber
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. Our paper tackles 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 records fine-grained occupational codes and tracks 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.
Keywords: internal labor markets; organization of labor; wage setting
JEL Codes: J31; J62; M5
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| internal labor markets (ILMs) (J46) | wage dynamics (J31) |
| hierarchy levels (D73) | average log wages (J31) |
| firm size (L25) | length of hierarchy (D73) |
| internal hierarchy (L22) | individual wages (J31) |
| higher ability individuals (D29) | promotions (M51) |