Resource title

Workplaces in the Primary Economy and Wage Pressure in the Secondary Labor Market

Resource image

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Resource description

This paper develops a two-sector general equilibrium model in which firms in the primary economy have to create workplaces prior to production and product market competition. For this, we introduce the endogenous sunk cost approach with two-stage decisions of firms from IO in the macro-labor literature. By hypothesizing that technological change has lowered marginal costs but has raised organizational requirements for installing workplaces, we are capable to explain downsizing of low-skilled jobs in the primary economy despite wage flexibility ex ante. This leads to more accentuated labor market segmentation, i.e. an increase in wage pressure in the secondary economy.

Resource author

Josef Falkinger, Volker Grossmann

Resource publisher

Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/21394

Resource license

Adapt according to the presented license agreement and reference the original author.