9 January 2003 A Theory of Careers in Hierarchical Internal Labor Markets Thomas J. Dohmen 1 Abstract The paper develops a model that explains a broad pattern of evi- dence on careers in multilevel organizations. It shows how job mobility inside firms depends on changes in the size of the organization. Pro- motion rates rise (fall) during a corporate expansion (contraction). Economic conditions therefore affect individual career mobility and earnings profiles. The model analyzes how the interaction between human capital accumulation and learning impacts on the assignment of workers to jobs at different levels of authority in the corporate hier- archy. The model makes predictions about the timing of the provision of formal training. Keywords: Career Mobility, Learning, Sorting, Job Assignment JEL codes: J00, M10 ∗ This work has benefited from comments by and fruitful discussions with Gary Becker, Mike Gibbs, Boyan Jovanovic, Bob Lucas, Franz Palm, Gerard Pfann, Canice Prendergast, Aloysius Siow, and Lars Stole. I am grateful for contributions from seminar participants at the European Winter Meetings of the Econometric Society in Budapest. All errors are mine. 1 IZA, P.O. Box 7240, D-53072 Bonn, Germany. Email: dohmen@iza.org Tel.: +49-228-3894-531, Fax: +49-228-3894-510. Approximately 8400 words