The Structure of Economic Segmentation: A Dual Economy Approach

Abstract

We note the need for a measure of economic segmentation based on current empirical data for a range of theoretically relevant indicators. Drawing on a dual economy interpretation of the relationship between economic organization and labor market structure, we identify a set of empirical indicators which relate to the degree of oligopoly versus competition in industrial settings. We use factor analysis to test the dual economists' expectation of a common dimension underlying indicators of economic concentration and scale and the characteristics of product and labor markets. After confirming this expectation, we use factor scores to define an index of segmentation for industrial categories. Finally, we demonstrate the application of dichotomous and continuous segmentation measures to the analysis of a simple earnings determination model.