The Labour Market and the Distribution of Income: The Dual Labour Market Approach

Tsuneo Ishikawa

in Income and Wealth

Published in print February 2002 | ISBN: 9780198288626
Published online November 2003 | e-ISBN: 9780191596469 | DOI:
 The Labour Market and the Distribution of Income: The Dual Labour Market Approach

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This chapter begins by providing an overview of the basic arguments of the dual labour market approach and of previous attempts to construct a formal analytical framework, and, by drawing attention to some important but neglected points, proposes a synthesis with which to understand the working of the labour market. Section 5.1 examines various empirical criticisms of the neoclassical theory, and discusses the need for a new analytical framework as well as the features that must be incorporated into such a framework; the section also serves as an introduction to the theoretical discussion that follows. Section 5.2 considers the determinants of the division of labour and of technology that are treated as exogenous in the neoclassical theory from a historical and political‐economy viewpoint, and also briefly surveys the historical process that gave rise to the internal labour markets of firms ( the key concept in this approach). Section 5.3 discusses the content of the dual labour market hypothesis, and Sect. 5.4 constructs a model of the economy with dual labour markets and analyses the determinants of earnings distribution in the long run, also examining points of controversy with the neoclassical approach. Section 5.5 presents an analytical framework embodying the theory of incentive‐dependent exchange, derives implications on the allocation of employment opportunities and the distribution of earnings, and discusses in what respects this theory competes with the neoclassical theory.

Keywords: division of labour; division of technology; dual labour market; employment opportunities; incentives; income distribution; internal labour market; labour market; neoclassical economics

Chapter.  33067 words.  Illustrated.

Subjects: Public Economics

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