NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Transactions Costs and Internal Labor Markets

Sherwin Rosen

NBER Working Paper No. 2407
Issued in October 1987
NBER Program(s):   LS

The concept of transactions costs used by Coase in "The Nature of the Firm" is applied to the internal labor market of an organization. Under joint production it is shown that the number of transaction-specific prices necessary to decentralize labor allocations rises geometrically with the size of the work force. Complexity of calculation and costs of implementation constrains the possibilities for internal decentralization through a price mechanism and substitutes a more authoritarian system of allocation instead. These same issues of complexity and implementation costs limit the usefulness of agency theory as a conceptual framework for this problem. The analysis suggests that an internal labor market must be viewed in a more comprehensive framework of a personnel management system.

download in pdf format
   (251 K)

download in djvu format
   (183 K)

email paper

This paper is available as PDF (251 K) or DjVu (183 K) (Download viewer) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w2407

Published: Rosen, Sherwin. "Transactions Costs and Internal Labor Markets." Journal of Law, Economics, and Organization, Vol. 4, No. 1, (Spring 1988), pp. 49-64. citation courtesy of

Users who downloaded this paper also downloaded these:
Lazear and Oyer w10192 Internal and External Labor Markets: A Personnel Economics Approach
Rosen w3542 Contracts and the Market for Executives
Spiller w16735 Transaction Cost Regulation
Bose and Lang w17623 A Theory of Monitoring and Internal Labor Markets
 
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