Abstract
This paper examines two issues concerning a dual economy theory of labor markets. Using data from the older men's file of the National Longitudinal Surveys, I first investigate the degree to which differences in rates of pay among economic sectors (competitive, monopoly, public) are accounted for by sector differences in (1) human capital composition, (2) unionization, (3) occupational skill requirements, and (4) other factors producing an ability and willingness to pay high wages. The results of this decomposition suggest that the greater ability and willingness to pay high wages and the higher levels of unionization are the primary factors producing a monopoly sector pay premium. Second, I examine how racial differences in pay vary across sector and perform an analogous decomposition of these differences. In contrast to several previous studies, the relative disadvantages of black men were found to be somewhat greater in the competitive sector than in the monopoly sector.
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