A Goodness of Fit Test of Dual Labor Market Theory

William T. Dickens and Kevin Lang

No 2350, NBER Working Papers from National Bureau of Economic Research, Inc

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.

Date: 1987-08
Note: LS
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Citations: View citations in EconPapers (4)

Published as "A Test of Dual Labor Market Theory", American Economic Review , Vol. 75, no.4 (1985): 792-805.

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