Labor Market Segmentation, Wage Dispersion and Unemployment

33 Pages Posted: 2 Jan 2001 Last revised: 23 Aug 2010

See all articles by Kevin Lang

Kevin Lang

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

William T. Dickens

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

Date Written: May 1992

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.

Suggested Citation

Lang, Kevin and Dickens, William T., Labor Market Segmentation, Wage Dispersion and Unemployment (May 1992). NBER Working Paper No. w4073, Available at SSRN: https://ssrn.com/abstract=254885

Kevin Lang (Contact Author)

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William T. Dickens

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