Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/21394
Authors: 
Falkinger, Josef
Grossmann, Volker
Year of Publication: 
2002
Series/Report no.: 
IZA Discussion paper series 523
Abstract: 
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.
Subjects: 
dual labor market
endogenous sunk costs
organizational labor
segregation
workplace
JEL: 
C23
J26
C25
Document Type: 
Working Paper

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