Internal Labor Markets and Workplace Injury

In this paper, we study how an internal labor market influences workplace injury using novel data on the payroll and workers’ compensation claims of Los Angeles traffic officers. We use the leave take by coworkers at the same location as an instrument to identify the causal relationship between injury and daily labor supply. Self-selection via daily labor supply decisions reduces the organization-wide injury rate by 48 percent compared to if workers were randomly assigned to work. The majority of the selection effect cannot be predicted by observables, therefore individual choice is crucial in mitigating workplace injury. These results imply that internal labor markets can be designed to further reduce injury, for example via shift auctions where the officer who bids the lowest wage receives the shift.