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Labor Market Segmentation and the Union Wage Premium

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  • Dickens, William T
  • Lang, Kevin

Abstract

Studies of the earnings of union workers have consistently shown that they earn considerably more than nonunion workers. This paper considers whether part of this observed union/nonunion differential is due to unions organizing high paying primary sector jobs. We extend our earlier work on the dual labor market in which we used an unknown regime switching regression to identify two labor market sectors --a high wage primary sector and a low wage secondary sector. Here we estimate a model where worker's wages are determined by one of three wage equations: a union wage equation, a nonunion primary equation or a nonunion secondary equation. If individuals are in the union sector their sector is treated as known. If they are not then their sector is treated as unknown. Parameter estimates for this model suggest that union/nonunion differences are very large for average workers even when comparing union and nonunion primary workers. We continue to find distinct primary and secondary sectors with wage equations similar to those that would be expected from the dual market perspective. Since it appears that union workers may be receiving large wage premiums it seems likely that there is non-price rationing of union jobs. If there is, our finding inprevious papers of non-price rationing of primary sector jobs may have been due only to the rationing of union jobs. We test for the existence of non-price rationing of nonunion primary sector employment in this three sector model and continue to find evidence that at least black workers find it difficult to secure primary sector employment.

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Bibliographic Info

Article provided by MIT Press in its journal Review of Economics & Statistics.

Volume (Year): 70 (1988)
Issue (Month): 3 (August)
Pages: 527-30

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Handle: RePEc:tpr:restat:v:70:y:1988:i:3:p:527-30

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Web page: http://mitpress.mit.edu/journals/

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Cited by:
  1. William T. Dickens & Kevin Lang, 1992. "Labor Market Segmentation Theory: Reconsidering the Evidence," NBER Working Papers 4087, National Bureau of Economic Research, Inc.
  2. LEDUC Kristell & GENEVOIS Anne-Sophie, 2012. "Segmentation du marché du travail - le cas luxembourgeois," CEPS/INSTEAD Working Paper Series 2012-35, CEPS/INSTEAD.
  3. Rebitzer, James B & Robinson, Michael D, 1991. "Employer Size and Dual Labor Markets," The Review of Economics and Statistics, MIT Press, vol. 73(4), pages 710-15, November.
  4. Montgomery, Edward & Shaw, Kathryn, 1997. "Pensions and Wage Premia," Economic Inquiry, Western Economic Association International, vol. 35(3), pages 510-22, July.
  5. Erica L. Groshen, 1988. "Why do wages vary among employers?," Economic Review, Federal Reserve Bank of Cleveland, issue Q I, pages 19-38.
  6. Rudy Fichtenbaum, 2006. "Labour market segmentation and union wage gaps," Review of Social Economy, Taylor & Francis Journals, vol. 64(3), pages 387-420.
  7. Irene Brambilla & Rafael Dix Carneiro & Daniel Lederman & Guido Porto, 2011. "Skills, Exports, and the Wages of Seven Million Latin American Workers," CEDLAS, Working Papers 0119, CEDLAS, Universidad Nacional de La Plata.
  8. Assaad, Ragui, 1997. "Kinship ties, social networks, and segmented labor markets: evidence from the construction sector in Egypt," Journal of Development Economics, Elsevier, vol. 52(1), pages 1-30, February.
  9. Kevin Lang & William T. Dickens, 1987. "Neoclassical and Sociological Perspectives on Segmented Labor Markets," NBER Working Papers 2127, National Bureau of Economic Research, Inc.

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