A Theory of Wage Dispersion and Job Market Segmentation.

Job market segmentation refers to the idea that there tends to be a correlation among high wages, high productivity, high capital intensity, high value added, few quits relative to layoffs, and low labor turnover. This paper develops a model of wage dispersion and job market segmentation based on the very sparce assumption that the only departure from a strictly orthodox neoclassical world consists of wages being sticky in the short run. Implications of the model are explored and discussed. Copyright 1989, the President and Fellows of Harvard College and the Massachusetts Institute of Technology.