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Segmented Labour Markets and Unemployment

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  • Lindbeck, A.
  • Snower, D.J.

Abstract

The paper suggests alternatives to the Harris-Todaro theory to explain unemployment in segmented labour markets. We focus on a labour market with a perfectly competitive secondary sector and an imperfectly competitive primary sector, the latter combining salient features of the efficiency-wage, insider-outsider and bargaining theories of employment and wage formation. Unemployment and labour-market segmentation are explained with reference to heterogeneous preferences, productivities and endowments among workers. The responsiveness of unemployment to external shocks is shown to depend crucially on whether the above heterogeneities are exogenously given or endogenously generated through workers' employment histories.
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Suggested Citation

  • Lindbeck, A. & Snower, D.J., 1990. "Segmented Labour Markets and Unemployment," Papers 483, Stockholm - International Economic Studies.
  • Handle: RePEc:fth:stocin:483
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    Cited by:

    1. Agenor, Pierre-Richard & Aizenman, Joshua, 1999. "Macroeconomic adjustment with segmented labor markets," Journal of Development Economics, Elsevier, vol. 58(2), pages 277-296, April.
    2. Sebastian Edwards, 1992. "Sequencing and Welfare: Labor Markets and Agriculture," NBER Working Papers 4095, National Bureau of Economic Research, Inc.
    3. Eduardo Lora & Mauricio Olivera, 1998. "Macro Policy and Employment Problems in Latin America," Research Department Publications 4116, Inter-American Development Bank, Research Department.
    4. Eduardo Lora & Mauricio Olivera, 1998. "Políticas macro y problemas del empleo en América Latina," Research Department Publications 4117, Inter-American Development Bank, Research Department.

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    Keywords

    efficiency ; wages ; contracts ; demand;

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