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Distributional assumptions and a test of the dual labor market hypothesis

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  • John Baffoe-Bonnie

Abstract

Recent application of the switching regression model to allocate workers into the primary and secondary labor markets is considered to be the best solution to the classification problem of the empirical testing of the dual labor market theory. In such models, normality of the error terms is assumed. This paper adopts the switching regression model to test the dual labor market theory by assuming different distributions of the error terms. The test results strongly support the dual labor market theory regardless of the assumption one makes about the error terms. However, the results indicate that different distribution can lead to different percentage distributions of workers in the two segments. In particular, the normal distribution generates more workers in the primary segment than the non-normal distributions. Therefore, care must be taken not to generalize the type of industries or occupations that fall under the primary and secondary segments. Copyright Springer-Verlag Berlin Heidelberg 2003

Suggested Citation

  • John Baffoe-Bonnie, 2003. "Distributional assumptions and a test of the dual labor market hypothesis," Empirical Economics, Springer, vol. 28(3), pages 461-478, July.
  • Handle: RePEc:spr:empeco:v:28:y:2003:i:3:p:461-478
    DOI: 10.1007/s001810200141
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    File URL: http://hdl.handle.net/10.1007/s001810200141
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    Cited by:

    1. 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, February.

    More about this item

    Keywords

    Key words: Distributional assumptions; Dual Labor market; Switching regression; JEL classification: C23; C29; J41; J42;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C29 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Other
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets

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