Employer Size and Dual Labor Markets

Abstract

Effort regulation models argue that labor markets are segmented because of differences in the technology of supervision across firms. Primary jobs pay above market clearing wages because these jobs are difficult to monitor. Secondary jobs, in contrast, pose no monitoring difficulties and, therefore, pay a market clearing wage. If, as the literature suggests, increases in employer size make supervision more difficult, the authors should observe that wages increase with employer size in primary jobs but not secondary jobs. Copyright 1991 by MIT Press.

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