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A Goodness of Fit Test of Dual Labor Market Theory

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  • William T. Dickens
  • Kevin Lang

Abstract

We subject our dual labor market model to a goodness of test fit and compare the results with those obtained using a single equation model with a complex error structure. The dual labor market does an excellent job of predicting the wage distribution except for failing to explain bunching at $7.50 and $10.00 per hour. The null hypothesis that the model is correct cannot be rejected at the .05 level. In contrast, the wage distribution predicted by the single labor market model differs significantly from the observed distribution.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2350.

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Date of creation: Aug 1987
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Publication status: Published as "A Test of Dual Labor Market Theory", American Economic Review , Vol. 75, no.4 (1985): 792-805.
Handle: RePEc:nbr:nberwo:2350

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Cited by:
  1. Pieter Serneels, 2004. "The Added Worker Effect and Intrahousehold Aspects of Unemployment," Development and Comp Systems 0409014, EconWPA.
  2. William T. Dickens & Kevin Lang, 1992. "Labor Market Segmentation Theory: Reconsidering the Evidence," NBER Working Papers 4087, National Bureau of Economic Research, Inc.
  3. Basch, Michael & Paredes-Molina, Ricardo D., 1996. "Are there dual labor markets in Chile?: empirical evidence," Journal of Development Economics, Elsevier, vol. 50(2), pages 297-312, August.

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