TY  - JOUR
AU  - Lazear,Edward P.
AU  - Oyer,Paul
TI  - Internal and External Labor Markets: A Personnel Economics Approach
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 10192
PY  - 2003
Y2  - December 2003
UR  - http://www.nber.org/papers/w10192
L1  - http://www.nber.org/papers/w10192.pdf
N1  - Author contact info:
Edward P. Lazear
Graduate School of Business
Stanford University
Stanford, CA 94305
Tel: 650/723-9136
Fax: 650/723-0498
E-Mail: lazear@stanford.edu

Paul Oyer
Graduate School of Business
Stanford University
518 Memorial Way
Stanford, CA 94305-5015
Tel: 650/736-1047
Fax: 650/725-0468
E-Mail: pauloyer@stanford.edu
AB  - Internal labor markets are those where workers are hired into entry level jobs and higher levels are filled from within. Wages are determined internally and may be quite free of market pressure. External labor markets imply that workers move somewhat fluidly between firms and wages are determined by some aggregate process where firms do not have significant discretion over wage setting. There are a number of theories that lead to internal labor markets. Using data from Sweden from the late 1980s, it is found that although there is significant evidence of internal promotion being important, a significant external market exists that affects both wage setting and hiring patterns. Even in Sweden, which most would not choose as the best example of a free labor market, external factors seem to create strong discipline on the ability of firms to set wages.
ER  -