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Labor Market Segmentation, Wage Dispersion and Unemployment

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  • Kevin Lang
  • William T. Dickens

Abstract

This paper briefly reviews the empirical evidence on labor market segmentation and presents some new results on the similarity of the pattern of segmentation across 66 different countries. The paper goes on to consider how unemployment might be understood in a labor market segmentation framework. Existing models of unemployment in a dual labor market suggest that unemployment should be concentrated among those who are ultimately employed in high wage jobs. In fact, unemployment seems to be concentrated among workers who are more likely to be found in low wage jobs. This happens even though at least some workers find low wage jobs easy to obtain, We develop a segmented labor market model capable of explaining these facts and then explore its implications for the aggregate unemployment rate. We find that it fits well with the facts.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4073.

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Date of creation: May 1992
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Publication status: published as William Darity Jr., ed. Labor Economics: Problems in Analyzing Labor Markets. Norwell, MA: Kluwer Academic Publishers, 1993.
Handle: RePEc:nbr:nberwo:4073

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References

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  1. Bulow, Jeremy I & Summers, Lawrence H, 1986. "A Theory of Dual Labor Markets with Application to Industrial Policy,Discrimination, and Keynesian Unemployment," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 4(3), pages 376-414, July.
  2. William T. Dickens & Lawrence F. Katz, 1987. "Inter-Industry Wage Differences and Theories of Wage Determination," NBER Working Papers 2271, National Bureau of Economic Research, Inc.
  3. Olivier Jean Blanchard & Peter Diamond, 1990. "Ranking, Unemployment Duration, and Wages," NBER Working Papers 3387, National Bureau of Economic Research, Inc.
  4. Lang, Kevin, 1991. "Persistent Wage Dispersion and Involuntary Unemployment," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 106(1), pages 181-202, February.
  5. Dickens, William T & Lang, Kevin, 1985. "A Test of Dual Labor Market Theory," American Economic Review, American Economic Association, American Economic Association, vol. 75(4), pages 792-805, September.
  6. Alan B. Krueger & Lawrence H. Summers, 1986. "Reflections on the Inter-Industry Wage Structure," NBER Working Papers 1968, National Bureau of Economic Research, Inc.
  7. Montgomery, James D, 1991. "Equilibrium Wage Dispersion and Interindustry Wage Differentials," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 106(1), pages 163-79, February.
  8. Rebitzer, James B & Taylor, Lowell J, 1991. "A Model of Dual Labor Markets When Product Demand Is Uncertain," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 106(4), pages 1373-83, November.
  9. William T. Dickens & Kevin Lang, 1992. "Labor Market Segmentation Theory: Reconsidering the Evidence," NBER Working Papers 4087, National Bureau of Economic Research, Inc.
  10. Krueger, Alan B & Summers, Lawrence H, 1988. "Efficiency Wages and the Inter-industry Wage Structure," Econometrica, Econometric Society, Econometric Society, vol. 56(2), pages 259-93, March.
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Citations

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Cited by:
  1. Maite Blázquez & Marcel Jansen, 2005. "Search, Mismatch and Unemployment," Labor and Demography, EconWPA 0510012, EconWPA.
  2. Moen, Espen R, 2002. "Do Good Workers Hurt Bad Workers - or is it the Other Way Around?," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3471, C.E.P.R. Discussion Papers.
  3. Kevin Lang & William T. Dickens, 1993. "Bilateral Search as an Explanation for Labor Market Segmentation and Other Anomalies," NBER Working Papers 4461, National Bureau of Economic Research, Inc.
  4. Tobias Müller, 2000. "Migration, Unemployment and Discrimination," Research Papers by the Institute of Economics and Econometrics, Geneva School of Economics and Management, University of Geneva, Institut d'Economie et Econométrie, Université de Genève 2000.03, Institut d'Economie et Econométrie, Université de Genève.
  5. Inderst, Roman, 2005. "Competitive search markets with heterogeneous workers," European Economic Review, Elsevier, Elsevier, vol. 49(6), pages 1525-1542, August.
  6. Lang, Kevin & Kahn, Shulamit, 1998. "The effect of minimum-wage laws on the distribution of employment: theory and evidence," Journal of Public Economics, Elsevier, Elsevier, vol. 69(1), pages 67-82, July.

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