Abstract
Abstract Personnel economics analyses personnel issues inside the firm. Yet, each firm operates inside a labour market, and the functioning of such a market has important consequences for personnel economics. The view of personnel economics analysed in this book is based on two key properties of the labour markets: In an imperfect labour market the traditional competitive view of the labour market does not hold. In a competitive labour market, the wage is fully set by market forces and firm–worker pairs have no control over its value. In addition, in a perfect labour market the workers are just indifferent between working for the firm or working for somebody else. The resulting equilibrium wage is fully flexible, and whenever business conditions change, wages can be adjusted in response.
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