A Theory of Dual Labor Markets with Application to Industrial Policy, Discrimination and Keynesian Unemployment

58 Pages Posted: 6 Feb 2001 Last revised: 23 Jul 2010

See all articles by Jeremy Bulow

Jeremy Bulow

Stanford University; National Bureau of Economic Research (NBER)

Lawrence H. Summers

Harvard University; National Bureau of Economic Research (NBER); Harvard University - Harvard Kennedy School (HKS)

Date Written: July 1985

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.

Suggested Citation

Bulow, Jeremy I. and Summers, Lawrence H., A Theory of Dual Labor Markets with Application to Industrial Policy, Discrimination and Keynesian Unemployment (July 1985). NBER Working Paper No. w1666. Available at SSRN: https://ssrn.com/abstract=227195

Jeremy I. Bulow (Contact Author)

Stanford University ( email )

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National Bureau of Economic Research (NBER)

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Lawrence H. Summers

Harvard University ( email )

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Cambridge, MA 02138
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National Bureau of Economic Research (NBER)

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Harvard University - Harvard Kennedy School (HKS) ( email )

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Cambridge, MA 02138
United States

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