A Goodness of Fit Test of Dual Labor Market Theory

11 Pages Posted: 28 Dec 2006 Last revised: 5 Jun 2022

See all articles by William T. Dickens

William T. Dickens

Northeastern University - Department of Economics; Federal Reserve Banks - Federal Reserve Bank of Boston; Brookings Institution

Kevin Lang

Boston University - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: August 1987

Abstract

We subject our dual labor market model to a goodness of test fit and compare the results with those obtained using a single equation model with a complex error structure. The dual labor market does an excellent job of predicting the wage distribution except for failing to explain bunching at $7.50 and $10.00 per hour. The null hypothesis that the model is correct cannot be rejected at the .05 level. In contrast, the wage distribution predicted by the single labor market model differs significantly from the observed distribution.

Suggested Citation

Dickens, William T. and Lang, Kevin, A Goodness of Fit Test of Dual Labor Market Theory (August 1987). NBER Working Paper No. w2350, Available at SSRN: https://ssrn.com/abstract=349175

William T. Dickens (Contact Author)

Northeastern University - Department of Economics ( email )

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Brookings Institution ( email )

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Kevin Lang

Boston University - Department of Economics ( email )

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