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Following technical and organisational changes, firms may react to increasing skill requirements either by training or hiring the new skills, or a combination of the two. Using matched datasets with about 1,000 French plants, the authors assess the relative importance of these external and internal labour market strategies. They show that skill upgrading following technological and organisational changes takes place mostly through internal labour markets adjustments. Consistently with the results in the literature, they find that new technologies and organisational changes are associated with an upward shift in the occupational structure within firms. They show that about one third of the upgrading of the occupational structure is due to hiring and firing workers on the external labour market, whereas two-thirds are due to promotions.
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