ETLA Discussion Papers, The Research Institute of the Finnish Economy (ETLA) 1244
We study career and wage dynamics within and between firms using a large linked employer-employee panel dataset spanning 26 years. We construct six-level hierarchies for more than 5,000 firms. We replicate most of the analyses from Baker, Gibbs and Holmström (Quarterly Journal of Economics, 1994) and make some extensions. Many of our results corroborate their findings. Careers within firms are important, but the strong version of the theory of internal labor markets does not fit the data. Recent theories of career and wage dynamics explain our findings well.
internal labor markets employer changes promotions wage growth human capital