Working Paper: NBER ID: w1666
Authors: Jeremy I. Bulow; Lawrence H. Summers
Abstract: This paper develops a model of dual labor markets based on employers' need to motivate workers. In order to elicit effort from their workers, employers may find it optimal to pay more than the going wage. This changes fundamentally the character of labor markets. The modelis applied to a wide range of labormarket phenomena. It provides a coherent framework for understanding the claims of industrial policy advocates. It also can provide the basis for a theory of occupational segregation and discrimination which will not be eroded by market forces. Finally, the model provides the basis for a theory of involuntary unemployment.
Keywords: dual labor markets; industrial policy; discrimination; Keynesian unemployment
JEL Codes: J31; J71; E24
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Persistence of Wage Differentials (J31) | Dual Labor Market Structure (J42) |
| Demographic Factors (J11) | Wage Differentials (J31) |
| Industrial Policy (O25) | Economic Welfare (D69) |
| Involuntary Unemployment (J64) | Primary Sector Job Rationing (J68) |
| Primary Sector Job Rationing (J68) | Employment Dynamics (J69) |
| High Wages (J31) | Worker Effort (J29) |
| High Wages (J31) | Productivity (O49) |