A Dynamic Analysis of Segmented Labor Market

Abstract

Using the Panel Study of Income Dynamics data on the period 1982-1992, this paper investigates some mechanisms of the labor market in the United States. This market is analyzed as a stable structure constituted of segments which present contrasted characteristics under the usual distinction between primary and secondary sectors. Using a neural network algorithm applied on quantitative variables measured at the level of heads of household, a broad classification in four classes of situations is constructed. It shows a clear hierarchy going from situations of very precarious work or no work at all, to situations of stable jobs with higher wages than the average. A Markov chain, constructed with the trajectories between the different situations of these workers, shows a very stable structure of this segmented labor market. Keywords: segmented labor market, unemployment, trajectories, Kohonen algorithm, Markov chain.