DUALISM IN THE GERMAN LABOR-MARKET - A NONPARAMETRIC ANALYSIS WITH PANEL-DATA

Orthodoxy in economics gives pride of place to the hypothesis of compe nsating differentials. Applied to job quality criteria, such as wage l evels, job stability, and wage growth, the compensating differentials hypothesis implies that negative or positive job quality characteristi cs should-ceteris paribus-rarely coincide. Originating in the late 196 0s from studies of American inner-city labor markets, dualist labor ma rket theory has raised doubts about this assumption. At its core, dual ist analysis proposes that a dualism exists between a primary labor ma rket where ''jobs possess several of the following traits: high wages, good working conditions, employment stability and job security, equit y and due process in the administration of work, and chances for advan cement'' and a secondary market where jobs ''tend to involve low wages , poor working conditions, considerable variability in employment, and little opportunity to advance'' (Doeringer and Piore 1971). In the 19 80s, there were several attempts to apply dual or segmented labor mark et theory to European economies, including the German labor market. Th e mixed findings of these analyses have cast doubt upon the transferab ility of dualist theory to these contexts. In the 1990s, as unemployme nt figures increased and labor market deregulation initiatives were la unched, there has been renewed interest in the possibility of a segmen tation of the German labor market. Whereas most studies have relied on qualitative evidence, this paper utilizes data from the first five wa ves of the German Socioeconomic Panel(1984 to 1989) in order to invest igate whether ''good'' or ''bad'' job characteristics tend to cumulate or to compensate each ether. Using a nonparametric procedure that eva luates the simultaneous occurrence of case-characteristics, we show th at evidence for compensating differentials in job quality characterist ics for the aggregate labor market is weak. There are, however, some i ndications of a cumulation of ''bad'' and ''good'' job characteristics in the non-market sector (i.e., public, non-profit, and semi-public e mployees). We interpret the inconsistency of our results with the hypo thesis of compensating differentials, as well as with dualist assumpti ons, to show the need for a differentiated assessment of job quality p atterns in European labor markets.