Stratification in a Dual Economy: A Sectoral Model of Earnings Determination

Abstract

We examine the importance of industrial sectors as hypothesized by the dual economy literature on the process of earnings determination. Using NORC survey data, we find substantively and statistically significant differences in labor force composition and economic status between core and periphery industrial sectors. Our application of a covariance regression model to these data demonstrates that the sectoral differentials in earnings cannot be explained away by differences in labor force composition and that there exist significant sectoral variations in the way that worker characteristics are rewarded. The findings are interpreted as evidence of the importance of structural factors for earnings determination. The critical implications of such findings for neoclassical research are noted.