Testing the Dual Labor Market Hypothesis Evidence from the Israel Labor Mobility Survey

Little research seems to have addressed the testing of the dual labor market model for nondeveloping economies outside the U.S. and the U.K. This paper examines the hypothesis for Israel. Utilizing individual data drawn from the Israel labor mobility survey and assigning workers to primary and secondary sectors on the basis of occupational prestige scores, earnings functions are estimated and compared for the two sectors. The results are very closely in line with predictions of the dual labor market model, thus strongly suggesting that the dual labor market hypothesis may be relevant for Israel.