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An Alternative Approach to Testing Dual Labour Market Theory

  • Launov, Andrey

    ()

    (University of Mainz)

In this paper we suggest an alternative approach to testing for the dual structure of the labour market. The novelty of the suggested approach is that rather than considering wage determination we concentrate on the turnover. To perform the test we suggest using a latent class count data framework, which allows modelling the turnover in the unobserved primary and secondary markets in the appropriate way. To illustrate the suggested approach we apply our methodology to the German labour market data. Our testing procedure finds no support for the predictions of the dual labour market theory. We also consider the problem of inconclusiveness of the test for involuntary confinement to the secondary market.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1289.

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Length: 22 pages
Date of creation: Sep 2004
Date of revision:
Handle: RePEc:iza:izadps:dp1289
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  1. Andrews, Donald W. K., 1988. "Chi-square diagnostic tests for econometric models : Introduction and applications," Journal of Econometrics, Elsevier, vol. 37(1), pages 135-156, January.
  2. Rainer Winkelmann & Klaus Zimmermann, 1998. "Is job stability declining in Germany? Evidence from count data models," Applied Economics, Taylor & Francis Journals, vol. 30(11), pages 1413-1420.
  3. William T. Dickens & Kevin Lang, 1985. "A Test of Dual Labor Market Theory," NBER Working Papers 1314, National Bureau of Economic Research, Inc.
  4. Sergi Jiménez-Mart�n & José M. Labeaga & Maite Mart�nez-Granado, 2002. "Latent class versus two-part models in the demand for physician services across the European Union," Health Economics, John Wiley & Sons, Ltd., vol. 11(4), pages 301-321.
  5. Barmby, Tim & Nolan, Michael & Winkelmann, Rainer, 2001. "Contracted Workdays and Absence," Manchester School, University of Manchester, vol. 69(3), pages 269-75, June.
  6. Andrews, Donald W K, 1988. "Chi-Square Diagnostic Tests for Econometric Models: Theory," Econometrica, Econometric Society, vol. 56(6), pages 1419-53, November.
  7. White, Halbert, 1982. "Maximum Likelihood Estimation of Misspecified Models," Econometrica, Econometric Society, vol. 50(1), pages 1-25, January.
  8. Leontaridi, Marianthi Rannia, 1998. " Segmented Labour Markets: Theory and Evidence," Journal of Economic Surveys, Wiley Blackwell, vol. 12(1), pages 63-101, February.
  9. Deb, Partha & Trivedi, Pravin K, 1997. "Demand for Medical Care by the Elderly: A Finite Mixture Approach," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 12(3), pages 313-36, May-June.
  10. Deb, Partha & Trivedi, Pravin K., 2002. "The structure of demand for health care: latent class versus two-part models," Journal of Health Economics, Elsevier, vol. 21(4), pages 601-625, July.
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