In Chan (1996), I suggest that a contest between internal and external candidates for a position within a firm is generally biased in favor of the former to maintain work incentive for existing workers. This implies that a successful external candidate tends to be superior in ability relative to...

This article presents a model of labor market adjustments as a sequential process of reallocation among various market and nonmarket sectors. Training costs introduce friction into the process, while fixed costs of working limit work sharing, resulting in unemployment. Adjustments in sectoral...

This article analyzes the choice between internal promotion and external recruitment within the framework of an economic contest. Opening up the competition for a position to external candidates reduces the chance of promotion for existing workers and, therefore, their incentive to work....