NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

A Theory of Monitoring and Internal Labor Markets

Gautam Bose, Kevin Lang

NBER Working Paper No. 17623
Issued in November 2011
NBER Program(s):   LS

We analyze a firm's job-assignment and worker-monitoring decisions when workers face occasional crises. Firms prefer to assign good workers to a difficult task and to not employ bad workers. Firms observe failures but only observe successfully resolved crises if they monitor the worker. If monitoring costs are positive but sufficiently small, for a range of probabilities that the worker is good, the firm assigns the worker to a low task (less sensitive to crises) and monitors her. At probabilities below this range and not too much above it, she is assigned to the low task and not monitored. At high probabilities of being good, she is assigned to the difficult task. We analyze the implications for internal labor markets of the case where a worker has the same ex ante probability of being good at all firms and learning is about ability at this particular firm.

download in pdf format
   (330 K)

email paper

This paper is available as PDF (330 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w17623

Users who downloaded this paper also downloaded these:
Lang and Lehmann w17450 Racial Discrimination in the Labor Market: Theory and Empirics
Lazear and Oyer w10192 Internal and External Labor Markets: A Personnel Economics Approach
Peri w17570 The Impact of Immigration on Native Poverty through Labor Market Competition
Davis and von Wachter w17638 Recessions and the Cost of Job Loss
Jordà, Schularick, and Taylor w17621 When Credit Bites Back: Leverage, Business Cycles, and Crises
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us