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Is the Israeli Labor Market Segmented? Revisiting the Mixture Regression Model

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  • Fishman, Ezra
  • Kimhi, Ayal

Abstract

We use a mixture regression model to identify segmentation in the Israeli labor market, and propose a new method for assigning workers to simulated segments. We identified a lowwage segment and a high-wage segment, as well as a third segment with a large wage variability that we interpret as “noisy” observations. We found quantitatively small but qualitatively reasonable differences in workers’ characteristics between the low-wage and high-wage segments, while the coefficient differences were much larger, indicating that much of the wage disparity in Israel is due to unobserved factors rather than to observable characteristics. Some policy-relevant insights are derived.

Suggested Citation

  • Fishman, Ezra & Kimhi, Ayal, 2013. "Is the Israeli Labor Market Segmented? Revisiting the Mixture Regression Model," Discussion Papers 164512, Hebrew University of Jerusalem, Department of Agricultural Economics and Management.
    • Handle: RePEc:ags:huaedp:164512
    DOI: 10.22004/ag.econ.164512
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