occupied by the worker within his/her current occupation. To my knowledge, this information
is not available in other surveys. 1 The survey also makes it possible to identify movements
both within and across firms through a question about changes in a worker’s employment sit-
uation in the previous year. These two pieces of information are central to the study of wage
and mobility dynamics within the firm. Another advantage of the data is that information is
collected over a large sample of individuals and therefore, the analysis of wage dynamics and
intra-firm mobility can be done over a large sample of firms.
The German case is an interesting application of the model because the German labor
market is thought to differ significantly from the U.S labor market (which provides many of
the observations which motivate Gibbons and Waldman’s research). Particularly, as shown in
Simonet (1998), interfirm job mobility declines much earlier in a worker’s career in Germany
than in the U.S. This suggests the possibility that intra-firm mobility may be more important
in Germany than in the United States. In addition, because of the strength of trade unions
and their close relationship with employer’s associations, German firms have to deal with
bureaucratic rules governing the setting of wages and job assignments, which could affect the
returns to intra-firm mobility on the part of German workers. On the other hand, Bruderl,
Diekmann and Preisendorfer (1991) show evidence that early promotions increase the chances
of future promotions using panel data on the personnel records of blue-collared workers in
a large West German company. Their analysis controls for individual and firm measurable
characteristics but not for unobserved individual heterogeneity suggesting that it might play
a role in the early promotion hypothesis tested. Therefore it is not clear, a priori, whether the
factors of individual ability, comparative advantage and learning, which seem to explain the
U.S experience, are more or less important in Germany.
A number of stylized facts have emerged from the empirical literature on internal wage poli-
cies and mobility within U.S. firms over the last twenty years. Borrowing from Gibbons (1997),
who provides a detailed review of the literature on careers in organizations, the main findings
are reported below. First, the main finding on intra-firm mobility concerns serial correlation
in promotion rates. Holding tenure in the current job constant, promotion rates decrease with
tenure in the previous job. 2 A related finding is that demotions are rare (although this finding
1 In particular, the PSID and NLSY occupational codes do not provide a natural ranking of job levels
comparable across occupations.
2Rosenbaum (1984), Baker, Gibbs and Holmstrom (1994 a,b), Podolny and Baron (1997) and Chiappori and
al. (1996).