Services and the New Economy: Toward a New Labor Market Segmentation
Author(s)
Osterman, Paul S.
Abstract
The theory of labor market segmentation was widely discussed in labor economics in the early 1970s, as an explanation of inequality in job opportunities and earnings. Since then, the theory has faded in popularity; most economists prefer human capital theory as an explanation of labor market inequalities. This essay examines the theoretical basis for segmentation, offers an improved specification and empirical test of the theory, and concludes that it provides both a good fit to the data, and a more promising research agenda than human capital theory.
