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(Why) Are Internal Labor Markets Active in French Business Groups?
Exploiting matched employer-employee data merged with information on the ownership structure of business groups, we document that French groups actively operate Internal Labor Markets (ILMs). On average, the probability that a firm hires a worker employed in its group exceeds
by around 10 percentage points the probability to hire a worker employed outside the group. This excess probability is larger for job-to-job transitions involving managerial tasks and other high-skill occupations (engineers, high-level technicians, doctors and lawyers) as compared to transitions between unskilled occupations (blue collars, drivers and shop assistants). This suggests that ILMs add the most value with respect to the external labor market when informational asymmetries and training costs are large. We also find that the ILM is more active in groups that are more diversified, which supports the view that groups rely on the ILM to coordinate the employment response of affiliated firms to idiosyncratic shocks. In line with this, we also find that the ILM is particularly active in reallocating displaced workers when a firm or plant closure occurs
within the group.
Associate Professor of Economics at the University of Salerno, Giovanni Pica holds a Ph.D. from the Universitat Pompeu Fabra. His research focuses on the labour market effects of financial market imperfections, globalization and labour market institutions.
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