DISCRIMINATION AND OPEN UNEMPLOYMENT IN A SEGMENTED LABOR-MARKET

Jobs in the primary sector require firm-specific training, with wages determined as a result of bargaining. Firms pay for the training and s ince they are imperfectly informed about worker productivity, they tes t workers before hiring them. The secondary sector is competitive. Tak ing a job in the secondary sector signals low productivity, and theref ore workers in the secondary sector are unable to get jobs in the prim ary sector. Open unemployment coexists with unfilled vacancies for low wage jobs.