TY  - JOUR
AU  - Rosen,Sherwin
TI  - Transactions Costs and Internal Labor Markets
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 2407
PY  - 1987
Y2  - October 1987
UR  - http://www.nber.org/papers/w2407
L1  - http://www.nber.org/papers/w2407.pdf
N1  - Author contact info:
Sherwin Rosen
Department of Economics University of Chicago
1126 East 59th Street
Chicago, IL   60637
Tel: 312-702-8166
AB  - 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.
ER  -