Insurance Between Firms: The Role of Internal Labor Markets

Finance

Speaker:Giacinta Cestone, Cass Business School
Date: Tuesday 6 December 2016
Time: 1:45 pm
Location: Constantine Leventis Teaching Room, Building: one

Further details

Abstract
We investigate how Internal Labor Markets (ILMs) allow organizations to accommodate
shocks calling for costly labor adjustments. Using data on workers’ mobility within French
business groups, we find that adverse shocks a↵ecting affiliated firms boost the proportion of
workers redeployed to other group units rather than external firms. This effect is stronger when
labor regulations are stricter and destination-firms are more efficient or enjoy better growth
opportunities. Affiliated firms hit by positive shocks rely on the ILM for new hires, especially
high-skilled workers. Overall, ILMs emerge as a co-insurance mechanism within organizations,
providing job stability to employees as a by-product.