The Economic Analysis of Internal Labour Markets*

The internal labor market concept has had a major impact upon economic analysis. In particular, it has prompted economists, to closely examine questions of work effort and motivation, and to recognize that labor is a qualitatively different factor of production from capital. Economists have disagreed, however, on the most appropriate manner in which to integrate the internal labor market into economic theory. Empirical research upon the internal labor market by economists has been minimal, partly reflecting the inappropriateness of conventional economic methods for internal labor market research. It is concluded that there is a need for detailed and disaggregated research on the internal labor market by economists.