Growing interest has emerged recently in the field of personnel economics, defined as the use of economics to understand the internal workings of the firm. This has led in practice to a few in-depth investigations of the personnel policies in a single firm, and to a theoretical attempt to identify which theories were most suited to the findings obtained.
However, the literature has remained silent about the way personnel policies react to external shocks, probably because it investigated personnel matters in only one firm, which was de facto isolated from the outside environment. This project will focus on the analysis of the effects of three major external changes on the internal organization of firms: mergers, technological change and a change in the competitive environment.
Various aspects of personnel policies are likely to be influenced by these changes, such as the hierarchical structure, the way to promote individuals, the importance of external hiring, screening processes, turnover rates, career dynamics and wage formation.
Using a unique linked employer-employee dataset covering the entire population of Denmark over the last twenty years, I will analyze these topics in depth, and reconsider theories of internal labour markets by looking at the influence of the external labour market. Considering the outside options in the theoretical framework modifies the incentives of the workers.
From the perspective of the firm, competition with other firms for talent will affect its personnel policy, possibly creating conflicts between its different goals. By considering competition in the labour market, in addition to the external changes, we will offer a richer and more realistic analysis of the internal organization of the firm.
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