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REASSESSING SEGMENTATION IN THE LABOUR MARKET: AN APPLICATION FOR ITALY 1995–2004

Authors


Dipartimento di Studi su Politica, Diritto e Società, University of Palermo, Piazza Bologni 8, 90134 Palermo, Italy. Email: michele.battisti@unipa.it. A former version of this paper had been presented to the Applied Econometrics Association conference of Naples 2006, and the Italian Association of Labour Economists (AIEL) of Udine, 2006. My gratitude goes to all the participants to the sessions for very useful discussions. I also wish to thank Piero Cipollone, John Hey, Christopher Parmeter, Michel Wedel and two anonymous referees for helpful comments and explanations about technical details. The usual disclaimer applies.

ABSTRACT

The aim of this paper is to test for the presence of dualism in a standard wage regression. The disparity in wages between primary and secondary workers, according to labour market segmentation theory, is not provided by worker characteristics, but rather by job characteristics. A standard way to assess this situation is by looking at the estimated coefficients in a standard regression for comparable workers across different labour market segments. In an attempt to avoid arbitrary modelling choices, we deploy mixture regression methods which allow for endogenous determination of the number of existing labour market segments. Using Italian data, our modelling strategy outlines stark differences in returns to human capital between homogeneous workers in different markets. Thus, future policies should consider these findings when implementing labour market measures.

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