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Journal of Business Economics

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01-02-2013 | Original Paper

Careers and productivity in an internal labor market

Authors: Philip Yang, Simon Janssen, Christian Pfeifer, Uschi Backes-Gellner

Published in: Journal of Business Economics | Issue 2/2013

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Abstract

This paper contributes to the existing literature by evaluating the effects of age and tenure on careers and productivity within an internal labor market. We use the administrative personnel records of a long balanced panel of blue-collar workers from a manufacturing firm in Germany with a distinct classification of wage groups and unique information on workers’ productivity in form of suggestions for productivity improvement. Using robust locally weighted regression, our main findings suggest that the probability of promotion is highest for younger workers and early in the career. Older workers are less likely to be promoted. The likelihood of making a rewarded suggestion is inversely u-shaped with respect to tenure and age. Furthermore, workers’ ability and firm-specific human capital determine the workers’ careers and productivity.

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The seminal paper is written by Baker et al. (1994a, b). For reviews, see Gibbons and Waldman (2006), Gibbs (1995), Gibbons and Waldman (1999b).

Dostie (2006) estimates the effects of age on wages and productivity. However, his results are limited by a relatively short observation period. Daveri and Maliranta (2006) use matched employer-employee data to observe the effects of age on wage and productivity.

The seminal works using performance ratings are two studies by Medoff and Abraham (1980, 1981). A review of the relevant literature is written by Lin (2005).

Oster and Hamermesh (1998) use the publications of researchers. Fair (1994) observes athletes. For a review, see Skirbekk (2003).

See Abowd and Kramarz (1999) for a comprehensive review.

E.g., incentive wages (Lazear 1979), efficiency wages (Akerlof and Yellen 1986), or sources of wage discrimination.

See Skirbekk (2003) for a comprehensive survey.

See Hellerstein et al. (1999), Hellerstein and Neumark (2004), Van Ours and Stoeldraijer (2010), and Goebel and Zwick (2009).

1976: Number of workers n = 105, panel length in years T = 27; 1977 n = 96, T = 26; 1978 n = 77, T = 25; 1979 n = 137, T = 24.

Baker et al. (1994a) identify levels through job descriptions. Herpen et al. (2006) use job ratings.

Overall, empirical studies on internal labor markets find significant positive effects of promotions on pay, with differences with respect to convexity and size (Grund 2002).

The use of continuous age and tenure information serves the purpose of detailed descriptive analysis.

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Title: Careers and productivity in an internal labor market
Authors: Philip Yang
Simon Janssen
Christian Pfeifer
Uschi Backes-Gellner
Publication date: 01-02-2013
Publisher: Springer-Verlag
Published in: Journal of Business Economics / Issue 2/2013
Print ISSN: 0044-2372
Electronic ISSN: 1861-8928
DOI: https://doi.org/10.1007/s11573-012-0649-x

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Other articles of this Issue 2/2013

Adjustments of wage-tenure profiles with respect to entry age

Determinants and effects of intra-firm trainings: evidence from a large German company

The impact of individual and collective reputation on wine prices: empirical evidence from the Mosel valley

Special issue “Insider Econometrics”