Wages and Employment in a Segmented Labor Market
Ian McDonald () and
Robert Solow
The Quarterly Journal of Economics, 1985, vol. 100, issue 4, 1115-1141
Abstract:
This paper analyzes the impact of business cycle fluctuations on a labor market segmented into a unionized primary sector and a "competitive" secondary sector. Either permanent or temporary changes in real aggregate demand are shown to widen the intersectoral wage differential in recession and, under reasonable specifications of key parameters, to cause greater fluctuations of primary-sector employment than secondary-sector employment. This pattern agrees with the stylized facts of the U. S. economy.
Date: 1985
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