Segmented Labour Markets: Theory and Evidence

This paper examines the possibility of accepting the labour market segmentation approach as a valid alternative to the classical and neo‐classical analysis of labour markets. It consists of three main parts. The first part contains a historical analysis of both the distant and recent origins of the labour market segmentation hypothesis. Part two outlines the central ideas of both segmentationalists and radical theorists who attempted to explain the fragmented nature of labour markets and the importance of institutional and social influences upon pay, employment and mobility of individual workers between different labour market sectors. The third part examines the case for labour market segmentation using four alternative techniques and discusses the issue of mobility among different labour market segments. It is thereby concluded that the lack of agreement among the segmented labour market theorists on both theoretical and methodological issues has prevented them from developing a consistent and convincing argument based on verifiable empirical evidence to validate their thesis.