Working Paper: NBER ID: w4073
Authors: Kevin Lang; William T. Dickens
Abstract: This paper briefly reviews the empirical evidence on labor market segmentation and presents some new results on the similarity of the pattern of segmentation across 66 different countries. The paper goes on to consider how unemployment might be understood in a labor market segmentation framework. Existing models of unemployment in a dual labor market suggest that unemployment should be concentrated among those who are ultimately employed in high wage jobs. In fact, unemployment seems to be concentrated among workers who are more likely to be found in low wage jobs. This happens even though at least some workers find low wage jobs easy to obtain, We develop a segmented labor market model capable of explaining these facts and then explore its implications for the aggregate unemployment rate. We find that it fits well with the facts.
Keywords: Labor Market Segmentation; Wage Dispersion; Unemployment
JEL Codes: J31; J64
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| labor market segmentation (J42) | unemployment rates (J64) |
| wage differentials across sectors (J31) | unemployment rates (J64) |
| high-wage jobs difficulty (J31) | higher unemployment among low-wage workers (F66) |
| segmented labor market model (J42) | wage structures across countries (J31) |
| unemployment rates (J64) | average wages (J31) |
| unemployment rates (J64) | fraction of low-productivity workers (J29) |