The aim of this paper is to see whether the Prussian (German) railroads in the 19
th century evolved a system of internal labor markets and to investigate the influence of a traditional rule of employment in the Prussian bureaucracy on the employment relationships. It examines the promotion systems of the middle-ranked employees and assesses the existence of internal labor markets in the Prussian railroads from the 1850'
S. This result indicates that the Prussian (private-and state owned-) railroads developed a modern employment system that was suitable for inducing available humane resources. The predominant employment of the retired officers and soldiers with the testimonial for maintenance in the civil service (
Civilversorgungsschein) had a negative effect on the functions of these internal labor markets. The result of the introduction of traditional German-Prussian bureaucratic system in the railroads was ambivalent; on the one hand, the bureaucracy was a source of an internal labor market -some preferential treatment of the long-time employed in the employment relationship, but, on the other hand, it burdened the modern economic organizations with the risk and/or uncertainity of the supplied labor forces.
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