Heterogeneous Workers, Dualism and Efficiency Wage

Francesco De PALMA

Working Papers of BETA from Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg

Abstract: We consider a segmented labor market characterized by a Shapiro-Stiglitz efficiency wage setting in both sectors. However, the primary sector and the secondary sector differ in the firing cost which induces a wage diffential. We suppose also a heterogeneous labor force characterized by the presence of > and > workers. Only controlled non-shirking workers of the secondary sector can enter in the primary one. This flow of these ones is assimilated to promoted workers. We show that involuntary unemployment emerges at the equilibrium because of efficiency wage setting in both sectors. We argue also that a reduction of the firing cost in the primary sector leads to a lower unemployment of both worker types and raises wage discrimination.

Keywords: labor turnover; efficiency wage; primary and secondary sectors (search for similar items in EconPapers)
JEL-codes: J21 J24 J63 J64 J71 (search for similar items in EconPapers)
Date: 2000
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Persistent link: https://EconPapers.repec.org/RePEc:ulp:sbbeta:2000-01

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