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Labor Market Segmentation Theory: Reconsidering the Evidence

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  • William T. Dickens
  • Kevin Lang

Abstract

We argue that Labor Market Segmentation theory is a good alternative to standard views of the labor market. Since it is sometimes argued that labor market segmentation theory is untestable, we first consider the uses of theory and the attributes of a good theory. We then argue that labor market segmentation has these attributes. It is internally consistent and is based on plausible assumptions about behavior and technology. More significantly, many of the predictions of the theory have been tested and confirmed. Further, from a dynamic view the theory has done quite well. When the theory has suggested new tests, far more often than not the predictions have been validated. Labor market segmentation theory has had to make little recourse to post-hoc explanations for unexpected empirical results. In contrast, human capital theory has required a series of post-hoc rationalizations to explain a large and growing body of empirical work motivated by the labor market segmentation perspective. Finally, we consider the implications of labor market segmentation theory for the practice of labor economics. We argue that further exploration of the implications of the theory for unemployment, trade. industrial policy and income distribution will provide useful insights and further tests of the theory.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4087.

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Date of creation: Jun 1992
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Publication status: Published as "Labor Market Segmentation and the Union Wage Premium", Review of Economics and Statistics, Vol. 70, no. 3 (1988): 527-530.
Handle: RePEc:nbr:nberwo:4087

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  1. William T. Dickens & Kevin Lang, 1986. "Labor Market Segmentation and the Union Wage Premium," NBER Working Papers 1883, National Bureau of Economic Research, Inc.
  2. Harry J. Holzer & Lawrence F. Katz & Alan B. Krueger, 1988. "Job Queues and Wages: New Evidence on the Minimum Wage and Inter-Industry Wage Structure," NBER Working Papers 2561, National Bureau of Economic Research, Inc.
  3. William T. Dickens & Kevin Lang, 1985. "Testing Dual Labor Market Theory: A Reconsideration of the Evidence," NBER Working Papers 1670, National Bureau of Economic Research, Inc.
  4. Lawrence F. Katz, 1986. "Efficiency Wage Theories: A Partial Evaluation," NBER Working Papers 1906, National Bureau of Economic Research, Inc.
  5. Michael L. Wachter, 1974. "Primary and Secondary Labor Markets: A Critique of the Dual Approach," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 5(3), pages 637-694.
  6. Weitzman, Marchin L, 1989. "A Theory of Wage Dispersion and Job Market Segmentation," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 104(1), pages 121-37, February.
  7. William T. Dickens & Lawrence F. Katz, 1986. "Interindustry Wage Differences and Industry Characteristics," NBER Working Papers 2014, National Bureau of Economic Research, Inc.
  8. Schiller, Bradley R, 1977. "Relative Earnings Mobility in the United States," American Economic Review, American Economic Association, American Economic Association, vol. 67(5), pages 926-41, December.
  9. Yellen, Janet L, 1984. "Efficiency Wage Models of Unemployment," American Economic Review, American Economic Association, American Economic Association, vol. 74(2), pages 200-205, May.
  10. Akerlof, George A, 1984. "Gift Exchange and Efficiency-Wage Theory: Four Views," American Economic Review, American Economic Association, American Economic Association, vol. 74(2), pages 79-83, May.
  11. 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.
  12. Lang, Kevin & Kahn, Shulamit, 1990. "Efficiency Wage Models of Unemployment: A Second View," Economic Inquiry, Western Economic Association International, Western Economic Association International, vol. 28(2), pages 296-306, April.
  13. Paul Osterman, 1975. "An empirical study of labor market segmentation," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 28(4), pages 508-523, July.
  14. 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.
  15. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, American Economic Association, vol. 74(3), pages 433-44, June.
  16. Stiglitz, Joseph E, 1976. "The Efficiency Wage Hypothesis, Surplus Labour, and the Distribution of Income in L.D.C.s," Oxford Economic Papers, Oxford University Press, vol. 28(2), pages 185-207, July.
  17. Oster, Gerry, 1979. "A Factor Analytic Test of the Theory of the Dual Economy," The Review of Economics and Statistics, MIT Press, vol. 61(1), pages 33-39, February.
  18. William T. Dickens & Lawrence F. Katz & Kevin Lang & Lawrence H. Summers, 1989. "Employee Crime, Monitoring, and the Efficiency Wage Hypothesis," NBER Working Papers 2356, National Bureau of Economic Research, Inc.
  19. Alan B. Krueger & Lawrence H. Summers, 1986. "Reflections on the Inter-Industry Wage Structure," NBER Working Papers 1968, National Bureau of Economic Research, Inc.
  20. James P. Smith, 2004. "Career Wage Mobility," Labor and Demography, EconWPA 0403015, EconWPA.
  21. Solow, Robert M., 1979. "Another possible source of wage stickiness," Journal of Macroeconomics, Elsevier, Elsevier, vol. 1(1), pages 79-82.
  22. Kletzer, Lori Gladstein, 1989. "Returns to Seniority after Permanent Job Loss," American Economic Review, American Economic Association, American Economic Association, vol. 79(3), pages 536-43, June.
  23. William T. Dickens & Kevin Lang, 1985. "A Test of Dual Labor Market Theory," NBER Working Papers 1314, National Bureau of Economic Research, Inc.
  24. Lazear, Edward, 1979. "The Narrowing of Black-White Wage Differentials Is Illusory," American Economic Review, American Economic Association, American Economic Association, vol. 69(4), pages 553-64, September.
  25. 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.
  26. William T. Dickens & Kevin Lang, 1987. "A Goodness of Fit Test of Dual Labor Market Theory," NBER Working Papers 2350, National Bureau of Economic Research, Inc.
  27. Salop, Steven C, 1979. "A Model of the Natural Rate of Unemployment," American Economic Review, American Economic Association, American Economic Association, vol. 69(1), pages 117-25, March.
  28. 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.
  29. Lindbeck, Assar & Snower, Dennis J, 1986. "Wage Setting, Unemployment, and Insider-Outsider Relations," American Economic Review, American Economic Association, American Economic Association, vol. 76(2), pages 235-39, May.
  30. Bliss, Christopher & Stern, Nicholas, 1978. "Productivity, wages and nutrition : Part I: the theory," Journal of Development Economics, Elsevier, Elsevier, vol. 5(4), pages 331-362, December.
  31. Heywood, John S, 1991. "Imports and Domestic Wages: Is the Relationship Consistent with Expense Preference Behavior?," Journal of Law, Economics and Organization, Oxford University Press, Oxford University Press, vol. 7(2), pages 355-72, Fall.
  32. Erica L. Groshen, 1988. "Sources of wage dispersion: the contribution of interemployer differentials within industry," Working Paper, Federal Reserve Bank of Cleveland 8802, Federal Reserve Bank of Cleveland.
  33. Weiss, Andrew W, 1980. "Job Queues and Layoffs in Labor Markets with Flexible Wages," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 88(3), pages 526-38, June.
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