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Workplaces in the Primary Economy and Wage Pressure in the Secondary Labor Market

Author

Listed:
  • Falkinger, Josef

    (University of Zurich)

  • Grossmann, Volker

    (University of Fribourg)

Abstract

This paper develops a two-sector general equilibrium model in which firms in the primary economy have to create workplaces prior to production and product market competition. For this, we introduce the endogenous sunk cost approach with two-stage decisions of firms from IO in the macro-labor literature. By hypothesizing that technological change has lowered marginal costs but has raised organizational requirements for installing workplaces, we are capable to explain downsizing of low-skilled jobs in the primary economy despite wage flexibility ex ante. This leads to more accentuated labor market segmentation, i.e. an increase in wage pressure in the secondary economy.

Suggested Citation

  • Falkinger, Josef & Grossmann, Volker, 2002. "Workplaces in the Primary Economy and Wage Pressure in the Secondary Labor Market," IZA Discussion Papers 523, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp523
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    Cited by:

    1. Egger, Hartmut & Grossmann, Volker, 2004. "Noncognitive Abilities and Within-Group Wage Inequality," IZA Discussion Papers 1024, Institute of Labor Economics (IZA).
    2. Volker Grossmann, 2005. "White-collar employment, inequality, and technological change," Journal of Economics, Springer, vol. 10(1), pages 119-142, December.

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    More about this item

    Keywords

    dual labor market; endogenous sunk costs; organizational labor; segregation; workplace;
    All these keywords.

    JEL classification:

    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities

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