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Is the Israeli Labor Market Segmented? Revisiting the Mixture Regression Model

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  • Fishman, Ezra
  • Kimhi, Ayal

Abstract

We use a mixture regression model to identify segmentation in the Israeli labor market, and propose a new method for assigning workers to simulated segments. We identified a lowwage segment and a high-wage segment, as well as a third segment with a large wage variability that we interpret as “noisy” observations. We found quantitatively small but qualitatively reasonable differences in workers’ characteristics between the low-wage and high-wage segments, while the coefficient differences were much larger, indicating that much of the wage disparity in Israel is due to unobserved factors rather than to observable characteristics. Some policy-relevant insights are derived.

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Bibliographic Info

Paper provided by Hebrew University of Jerusalem, Department of Agricultural Economics and Management in its series Discussion Papers with number 164512.

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Date of creation: 2013
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Handle: RePEc:ags:huaedp:164512

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Postal: Faculty of Agriculture, Food and Environmental Quality Sciences Hebrew University of Jerusalem, P.O. Box 12, Rehovot 76100
Phone: 08-9481230
Fax: 08-9466267
Web page: http://departments.agri.huji.ac.il/economics/indexe.html
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Related research

Keywords: labor market; workers; low-wage; high-wage; Regression Model; Labor and Human Capital; J31; C30;

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  1. William T. Dickens & Kevin Lang, 1985. "A Test of Dual Labor Market Theory," NBER Working Papers 1314, National Bureau of Economic Research, Inc.
  2. Deb, Partha & Trivedi, Pravin K, 1997. "Demand for Medical Care by the Elderly: A Finite Mixture Approach," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 12(3), pages 313-36, May-June.
  3. Partha Deb & Karen Smith Conway, 2002. "Is Prenatal Care Really Ineffective? Or, is the 'Devil' in the Distribution?," Economics Working Paper Archive at Hunter College 02/2, Hunter College Department of Economics.
  4. Alfonso Sousa-Poza, 2004. "Is the Swiss Labor Market Segmented? An Analysis Using Alternative Approaches," LABOUR, CEIS, vol. 18(1), pages 131-161, 03.
  5. Krueger, Alan B & Summers, Lawrence H, 1988. "Efficiency Wages and the Inter-industry Wage Structure," Econometrica, Econometric Society, vol. 56(2), pages 259-93, March.
  6. Ana Huguet Roig, 1999. "Testing Spanish labour market segmentation: an unknown-regime approach," Applied Economics, Taylor & Francis Journals, vol. 31(3), pages 293-305.
  7. Maria Grazia Pittau & Roberto Zelli, 2006. "Trends in Income Distribution in Italy: A Non-Parametric 90 and a Semi-Parametric Analysis," Journal of Income Distribution, Journal of Income Distribution, vol. 15(I), pages 90-118, December.
  8. Ariane Pailhé, 2003. "Labour Market Segmentation in Central Europe during the First Years of Transition," LABOUR, CEIS, vol. 17(1), pages 127-152, 03.
  9. Deb, Partha & Gallo, William T. & Ayyagari, Padmaja & Fletcher, Jason M. & Sindelar, Jody L., 2011. "The effect of job loss on overweight and drinking," Journal of Health Economics, Elsevier, vol. 30(2), pages 317-327, March.
  10. Maria Grazia Pittau & Roberto Zelli & Paul A. Johnson, 2010. "Mixture Models, Convergence Clubs, And Polarization," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 56(1), pages 102-122, 03.
  11. Wedel, M, et al, 1993. "A Latent Class Poisson Regression Model for Heterogeneous Count Data," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 8(4), pages 397-411, Oct.-Dec..
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