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Employer Size and Dual Labor Markets

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  • James B. Rebitzer
  • Michael D. Robinson

Abstract

Recently developed effort regulation models argue that labor markets are segmented because of differences in the technology of supervision across firms. primary jobs pay above market clearing wages because these jobs are difficult to monitor. Secondary jobs, in contrast, pose no monitoring difficulties and therefore pay a market clearing wage. If, as the literature suggests, increases in employer size make supervision more difficult, we should observe that wages increase with employer size in primary jobs but not in secondary jobs. We test this hypothesis using a switching regression model. We find evidence of an employer size wage effect in both primary and secondary labor markets. However, consistent with the prediction of effort control models, the size effect on wages is considerably larger in primary than secondary jobs.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3587.

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Date of creation: Jan 1991
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Publication status: published as Review of Economics and Statistics, Vol. 73, No. 4, (November 1991), p. 710-715.
Handle: RePEc:nbr:nberwo:3587

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  1. Cain, Glen G, 1976. "The Challenge of Segmented Labor Market Theories to Orthodox Theory: A Survey," Journal of Economic Literature, American Economic Association, vol. 14(4), pages 1215-57, December.
  2. Alan B. Krueger, 1991. "The evolution of unjust-dismissal legislation in the United States," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 44(4), pages 644-660, July.
  3. Calvo, Guillermo A & Wellisz, Stanislaw, 1978. "Supervision, Loss of Control, and the Optimum Size of the Firm," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 86(5), pages 943-52, October.
  4. Akerlof, George A, 1982. "Labor Contracts as Partial Gift Exchange," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 97(4), pages 543-69, November.
  5. repec:fth:prinin:258 is not listed on IDEAS
  6. Oliver E. Williamson, 1967. "Hierarchical Control and Optimum Firm Size," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 75, pages 123.
  7. Mellow, Wesley, 1982. "Employer Size and Wages," The Review of Economics and Statistics, MIT Press, vol. 64(3), pages 495-501, August.
  8. Dickens, William T & Lang, Kevin, 1988. "Labor Market Segmentation and the Union Wage Premium," The Review of Economics and Statistics, MIT Press, vol. 70(3), pages 527-30, August.
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Cited by:
  1. Zafar Mueen Nasir, 1998. "Determinants of Personal Earnings in Pakistan: Findings from the Labour Force Survey 1993-94," The Pakistan Development Review, Pakistan Institute of Development Economics, Pakistan Institute of Development Economics, vol. 37(3), pages 251-274.
  2. Christian Manuel Posso, 2010. "Calidad del empleo y segmentación laboral: un análisis para el mercado laboral colombiano 2001-2006," REVISTA DESARROLLO Y SOCIEDAD, UNIVERSIDAD DE LOS ANDES-CEDE.
  3. Jonas Agell & Helge Bennmarker, 2002. "Wage Policy and Endogenous Wage Rigidity: A Representative View From the Inside," CESifo Working Paper Series 751, CESifo Group Munich.
  4. Rebitzer, James B. & Taylor, Lowell J., 1995. "The consequences of minimum wage laws Some new theoretical ideas," Journal of Public Economics, Elsevier, Elsevier, vol. 56(2), pages 245-255, February.
  5. Rebitzer, James B., 1995. "Is there a trade-off between supervision and wages? An empirical test of efficiency wage theory," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 28(1), pages 107-129, September.
  6. ZENOU, Yves & SMITH, Tony E., 1994. "Efficiency Wages, Involuntary Unemployment and Urban Spatial Structure," CORE Discussion Papers, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) 1994076, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  7. Barth, Erling, 1992. "Why Do Some Firms Pay More? An Empirical Investigation of Inter-Firm Wage Differentials," Institute for Research on Labor and Employment, Working Paper Series, Institute of Industrial Relations, UC Berkeley qt7f18t2vt, Institute of Industrial Relations, UC Berkeley.
  8. Laura Juarez, 2008. "Are Informal Workers Compensated for the Lack of Fringe Benefits? Free Health Care as an Instrument for Formality," Working Papers, Centro de Investigacion Economica, ITAM 0804, Centro de Investigacion Economica, ITAM.
  9. Christopher Hanes, 2000. "Nominal Wage Rigidity and Industry Characteristics in the Downturns of 1893, 1929, and 1981," American Economic Review, American Economic Association, American Economic Association, vol. 90(5), pages 1432-1446, December.
  10. Rudy Fichtenbaum, 2006. "Labour market segmentation and union wage gaps," Review of Social Economy, Taylor & Francis Journals, Taylor & Francis Journals, vol. 64(3), pages 387-420.
  11. Albaek, Karsten & Arai, Mahmood & Asplund, Rita & Barth, Erling & Strojer Madsen, Erik, 1998. "Measuring wage effects of plant size," Labour Economics, Elsevier, Elsevier, vol. 5(4), pages 425-448, December.
  12. José Ignacio Uribe & Carlos Humberto Ortiz & Gustavo Adolfo García, 2007. "La segmentación del mercado laboral colombiano en la década de los noventa," Revista de Economía Institucional, Universidad Externado de Colombia - Facultad de Economía, Universidad Externado de Colombia - Facultad de Economía, vol. 9(16), pages 189-221, January-J.

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