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Wages and Employment in a Segmented Labor Market

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  • Ian M. McDonald
  • Robert M. Solow

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.

Suggested Citation

  • Ian M. McDonald & Robert M. Solow, 1985. "Wages and Employment in a Segmented Labor Market," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 100(4), pages 1115-1141.
    • Handle: RePEc:oup:qjecon:v:100:y:1985:i:4:p:1115-1141.
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