Testing for Labour Market Segmentation in Britain

According to the dual labor market theory, it is possible to identify distinct segments in the labor market that have different ways of allocating labor and determining wages. In this paper, the author tests this hypothesis by examining the role of institutional and demand-side factors in explaining the distribution of earnings among workers with comparable training and skill levels. A distinction is made between a strict version of the hypothesis based on "core" and "periphery" industry segments and what has been called the "heuristic" form of the segmentation theory involving a more flexible approach to divisions in the labor market.