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The Structure of Economic Segmentation: A Dual Economy ApproachAuthor(s): Charles Tolbert, Patrick M. Horan and E. M. BeckSource: American Journal of Sociology, Vol. 85, No. 5 (Mar., 1980), pp. 1095-1116Published by: The University of Chicago PressStable URL: http://www.jstor.org/stable/2778892 .Accessed: 02/06/2014 03:42

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The Structure f Economic Segmentation:A Dual EconomyApproach1CharlesTolbert, atrick M. Horan, nd E. M. BeckUniversity f Georgia

We note the need for measure f economic egmentation ased oncurrent mpirical ata for range f theoretically elevant ndicators.Drawing on a dual economy nterpretation f the relationship e-tween conomic rganization nd labor market tructure, e identifya set of empirical ndicators hich relate to the degree f oligopolyversus ompetition n industrial ettings. We use factor nalysis totest the dual economists' xpectation f a common imension nder-lying ndicators f economic oncentration nd scale and the char-acteristics f product nd labor markets. After onfirming his ex-pectation, e use factor cores o define n index f segmentation orindustrial ategories. Finally, we demonstrate he application ofdichotomous nd continuous egmentation easures o the analysisof a simple arnings etermination odel.

In the past decade there as been a resurgence f interest n the economicstructure f industrial apitalism Galbraith 1967; Baran and Sweezy1966; Shepherd 1979). One expression f this interest n the economicorganization f industry s the literature n the dual economy Averitt1968; Bluestone,Murphy, nd Stevenson 973; Gordon 1972; Edwards1975). This interest n economic tructure as received dded researchimpetus rom recent rend of reaction gainst ndividualistic esearchtraditions n social stratification Bibb and Form 1977; Beck, Horan,and

Tolbert 1978; Horan 1978).Although ual economy heory races ts ntellectual rigins o a diverseset of theoretical nd empirical works, n recent years t has achievedgrowing oherence s a view of the industrial tructure f modern api-talism. n the present aper, we attempt o contribute o that coherenceby examining he measurement f a key theoretical oncept, he conceptof "economic egmentation." e argue that despite the diversity n theoriginal iterature rom which dual economy heory erives, here s suf-ficient onsensus n empirical ndicators o provide basis for empirical

specification f the economic ectors roposed n that iterature.1 Portions of this research were funded by the University f Georgia Graduate Schooland the Georgia Agricultural xperiment tation. An earlier version of this paper waspresented t the annual meeting of the Southern Sociological Society, New Orleans,1978.

? 1980by The University f Chicago. 0002-9602/80/8505-0004$01.79

AJS Volume 85 Number 1095

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American ournal f Sociology

The basic theme which haracterizes he dual economy pproach-theimportance f differences n economic rganization or social structure

and individual behavior-is one of long-standing nterest n the socialsciences.J. H. Boeke (1953), an early proponent f the importance fsectoral ifferences orcolonialeconomic evelopment, roposed modelof economic ualism which ontrasted he Western ndustrial nd the tra-ditional agricultural ectors. Similarly, J. S. Furnivall's 1944, 1948)characterization f social and economic egmentation n the Far Easterncolonies s a "plural society" has inspired onsiderable nterest monganthropologists nterested n the British West Indies (see, e.g., Smith1965; Rubin 1960). The effect f this anthropological radition as beento deemphasize he mportance f economic luralism elative o culturalpluralism. n contrast, se of the concept f dual economy n the economicdevelopment iterature as tended to emphasize he existence f sectorsdefined n terms f the social and economic rganization f production.2Such an emphasis eemsquite compatible with the approach o the dualeconomy mployed ere.

A more proximate rigin or what s now referred o as dual economytheory s a set of studies of local urban abor markets onducted uringthe late 1960s (see, e.g., Baron and Hymer 1968; Wachtel 1970; Vie-torisz nd Harrison 1970; Harrison 1972). Among he common hemesnoted by Gordon 1972) in his review f this iterature re the relativeseparation f two historically efined abor markets sectors) which hedesignates s "primary" nd "secondary." The organization f work nthe secondary ector s characterized y low-skill obs and employmentinstability, hereas he organization f work n the primary ector pro-vides ob ladders, n-the-job raining, nd a differentiated agestructure.

The literature n economic egmentation xhibits ubstantial ntellectualdiversity. ne important ource f such diversity s the conceptualizationof economic egmentation. esearchers n the dual labor market iteraturetend ofocus n such characteristics s wages,working onditions, hancesfor dvancement, nd employment tability s delimiters f sectoral dis-tinctions. n contrast, esearchers n the dual economy iterature end tofocus n industrial tructure nd the economic rganization f productionas the basis for ectoral istinctions.

At one evel these differences aybe treated s differencesn emphasis.Dual labor market writers end to stress he description f segmentationin labor markets, with relatively ittle concern for the origins f suchsegmentation. ual economywriters cknowledge he existence f seg-mentation n labor markets, ut treat t as the consequence f more funda-

2 For an overview of the role of economic dualism in development iterature, eeMeier (1964), esp. chap. 2.

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Economic egmentation

mental processes f segmentation n the economic rder. "The centraltheoretical ssertion . . is that behavior bserved n the labor market

... reflects more fundamental rocesses n production tself. . . Tounderstand he labor market rocesses which produce' group differencesin incomes, nemployment, nd mobility, hen, we must nvestigate heinstitutional rrangements overning roduction" Edwards et al. 1975,p. 4).

The present ffort o construct n empirical measure f economic eg-mentation mploys ndicators f labor market haracteristics s well asindicators elating o the economic rganization f production. While ouranalysis oes not ssume he primacy f one set of ndicators ver nother,

it provides basis for evaluating he dual economists' uggestion hateconomic rganization nd labor market haracteristics re interrelated.

OLIGOPOLY, COMPETITION,AND THE DUALECONOMY

Concernwith the economic tructure f contemporary ndustrial ocietieshas come to focus ncreasingly n the distinction etween ompetitive ndmonopoly apitalism. While neoclassical conomists nd sociologists avebeen content o base their heories nd analyses on the assumption f apure competitive arket ystem, heir ounterparts n the dual economytradition ave questioned he applicability f a competitive odel o thoseportions f the economy haracterized y monopolistic r oligopolisticforms f organization.3 aran and Sweezy (1966, p. 6) provide clearstatement f this position: "Today the typical economic unit in thecapitalist world s not the small firm roducing negligible raction fa homogeneous utput for n anonymous market, ut a large-scale nter-prise producing significant hare of the output of an industry, r evenseveral ndustries, nd able to control ts prices, he volumeof its pro-duction, nd the types and amounts f its investments. t is thereforeimpermissible o ignore monopoly n constructing ur model of the econ-omy nd to go on treating ompetition s the general ase."

Dual economists ave attempted o use this distinction etween por-tions of the economy haracterized y competitive nd oligopolistic r-ganization s a basis for defining istinct conomic ectors. Averitt 1968,p. 1) defines he dual economy n terms f "two disparate ypes of busi-ness organization" which he refers o as "center firms" nd "periphery

firms": Center firms iffer rom eriphery irms n terms f economicsize, organizational tructure, ndustrial ocation, actor ndowment, imeperspective nd market oncentration." lthough Averitt dentifies is

3 In what follows we use the term oligopoly" to refer o all situations n which somesubset of firms n an industry ossesses market power. Oligopoly thus subsumes sit-uations of pure monopoly, ight ligopoly, nd loose oligopoly Shepherd 1979, p. 62).

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center nd periphery conomic ectors s consisting f "firms," e attachesa very different eaning o this term rom hat whichmight e suggested

by a casual reading. pecifically, [t]he word firm' efers o the businessorganization f industry" Averitt 1968, p. 3). Later writers efer odifferences etween ndustries n the organization f production s "in-dustrial" ifferences, trend whichwe shall continue n the present aper.

For these writers he distinction etween ligopolistic nd competitivecapitalism onstitutes major dimension n the industrial rganizationof production. luestone t al. (1973, pp. 28-29) describe two-sectormodel f ndustrial egmentation s follows:

The core conomy ncludes hose ndustries hat omprise hemuscle fAmericanconomicnd political ower. .. [t]he firms n the core con-omy re noted or high roductivity, igh rofits, ntensive tilization fcapital, igh ncidence f monopoly lements,nd high egree f unioni-zation.Workers ho re able to secure mployment n these ndustriesare, nmost ases, ssured f relatively ighwages nd better han verageworking onditionsndfringe enefits....

Beyond hefringes f the core economyies a set of industries hatlack lmost ll of the dvantages ormally oundn center irms.... Theperiphery ndustries re noted for their mall firm ize, abor ntensity,low profit, ow productivity, ntensive roductmarket ompetition, ackof unionization,nd ow wages.Unlike ore ector ndustries, heperiph-ery acks he ssets, ize and political ower o take dvantage f econ-omies f scaleor to spend arge ums n research nd development.

Traditionally conomists ave sought to measure ndustrial ligopolyin terms f the market ower oncentration ithin n industry. oncen-tration refers o the portion f the business activity market shares)within n industry hich s controlled y a small number f firms. hisis conventionally easured s the proportion f activity nder he controlof the four argest irms n an industry. n the past decade there has beena reaction gainst this overly implistic, ingle-factor odel of marketpower. Shepherd 1970, p. 47) presents he multifactor pproach o mo-nopoly s follows: In summary, tructural monopoly as a number felements ormal nd informal, nternal nd external. hey probably n-clude (1) market hares and asymmetry . . (2) barriers o entry ndthe whole range of cooperative rrangements hich reflect nformal r'soft' structure . . and (3) primarily elative ize, diversification ndvertical patterns mong external lements." hepherd rgues that while

no single element onstitutes satisfactory measure for the degree ofmarket owerpresent n an industry, a combination f several lementsmay ndicate high degree f probability hat market ower s present"(1970,p. 47).

We follow hepherd 1970, 1979) in seeking o base our designationof competitive nd oligopolistic conomic ectors n a set of multiple n-

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dicators. or present urposes we can group the indicators f industrialoligopolywhich re listed n table 1 into three general categories: 1)

measures f the capacity for oligopoly n an industry, 2) measures foligopolistic ehavior n the ndustrial roduct market, nd (3) measuresof oligopolistic ehavior n the ndustrial abor market.

The first roup of variables ncludesfactors hat reflect he potentialfor exercising ligopolistic market power. Most central to this capacityfor ligopoly s market oncentration. ther related factors re indicatorsof economic cale,which may be viewed s concomitants f vertical n-tegration nd barriers o entry both of which are elements f the po-tential for ndustrial ligopoly). As Shepherd 1979, p. 180) notes, the

capacity for oligopoly does not necessarily ead to oligopolisticmarketbehaviorwithin ndividual ndustries. he "core" sector escribed y dualeconomy heorists s one in which industries ct upon their capacitythrough ligopolistic ehavior n industrial roduct nd labor markets. nthe product market we use profit evels and industry evels of politicalcontributions nd advertising xpenditures s indicators f oligopolisticbehavior. Edwards (1975) has argued that oligopoly as important m-plications or abor markets s well as for product markets. ur indicatorsof oligopolistic ehavior n labor markets nclude measures of bureau-cratic organization, ages, nd work tability t the ndustry evel.

In the analysis below, we bring together hese multiple ndicators feconomic ligopoly n an attempt o construct measure of economicsegmentation. eretofore, esearchers nterested n employing he dualeconomy istinction etween ore and periphery conomic ectors haverather rbitrarily rouped ndustries ccording o narrative escriptionsfound n the literature. ibb and Form (1977) followAveritt's 1968)criteria nd assign major ndustry ivisions o core and periphery ectors.

Beck et al. (1978) use the discussion f economic ectors n Bluestoneet al. (1973) to classify ndustries n a similar wo-sector cheme.Although hese operationalizations f the core/periphery oncepthave

produced nteresting esults, neither s entirely atisfactory. irst, theseminal reatments f dual economy heory y Averitt 1968) and Blue-stone et al. (1973) do not alwayscorrespond n the allocation f indus-tries to core and periphery ectors. Consequently, comparison f thesector variables mployed y Bibb and Form (1977) and by Beck et al.(1978) reveals ome mportant iscrepanciesn the

placement f specificindustries. or example, the latter place wholesale trade, finance, ndprofessional ndustries n the core, while the former lace all of these nthe periphery.

A second unsatisfactory haracteristic f these operationalizations sthat neither eflects set of consistent mpirical riteria pplied to a

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range of industries.4 veritt 1969) presents variety f descriptive n-formation ora limited et of industries, rimarily manufacturing. lue-

stone et al. (1973) consider variety f industries ut focus primarilyon wage data. There is a clear need for empirical vidence hat coversthe full range of industries nd the full range of measures equired ythe dual economy oncept. A systematic nalysis f such data shouldhelpto eliminate iscrepancies mong existing measures of economic ectorand thus provide stronger oundation or further esearch.

The goal of this analysis s to provide a measure of economic eg-mentation which s consistent ith dual economy heory nd based oncurrent mpirical nformation. ual economists se the concept of eco-nomic ector o emphasize he mpact of economic rganization n socio-economic rocesses.However, he use of polar types uch as competitiveand oligopolistic apitalism does not deny the existence f a gradationin industrial ompetition anging rom ighly ompetitive t one extremeto highly ligopolistic t the other extreme: Oligopoly s complex forthree main reasons. First, there are infinite radients n the degree ofoligopoly. . . Second, he degree nd effect f the interdependence eednot be strong. ligopolists may fight r coordinate, r simply gnore ach

other and pursue ndependent olicies. . . Third, the group's nternalstructure may influence he outcome. A symmetric roup (all membersequal) may behave differently rom n asymmetric roup dominated yone firm). There are infinite arieties f such nternal tructures, oth ntheory nd in actual markets" Shepherd 979, pp. 180-81).

Thus an industry ith high market oncentration oes not necessarilyoperate n an oligopolistic ashion. This is one reason that the presentanalysis ncludes measures f economic cale and oligopolistic ehaviorin product nd labor markets s well as concentration. urther, he "test"of dual economy heory which our analysis provides s not a test of theexistence f a bimodal distribution r a "sectoral boundary" n one ormore mpirical ndicators. nstead our analysis constitutes test for theexistence f an underlying imension which s. common o all indicatorsand which xhibits he patterns f relationships redicted y dual econ-omy theory. he discontinuities uggested y dual economy heory renot discontinuities n the distribution f defining haracteristics. nstead,they re discontinuities n the work ituations nd socioeconomic xperi-

ences of individualworkers Beck et al. 1978; Horan, Tolbert, nd Beck1979), a topic to which we shall return ater n our analysis.

4 Hodson (1977) takes a step in the direction f comprehensiveness y analyzing fivecharacteristics f roughly 200 industries. He presupposes hree sectors n the economicstructure: monopoly, ompetition, nd state.

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DATA COLLECTION ANDANALYSIS

The accumulation f data to be used in the measurement f economicsegmentation as organized ccording o two principal onsiderations: 1)industries were to be the basic unit of analysis; (2) current, ontem-poraneous ata were neededfor set of conceptually elevant ndicators.Despite some variation n terminology, here s considerable onsistencyin the dual economy iterature egarding he choice of industry s theappropriate nit of analysis.Bluestone t al. (1973) discuss the sectoraldistinction n terms f industries, hile Averitt 1978) focuses n "firms"which he defines n terms f the "business organization f industries."Shepherd 1970, p. 34) notes that "[m]arket power s held by firms utit is exercised n markets," while Spilerman 1977, p. 579n.) suggeststhat similarities n technology, rganization, nd demand make industrythe appropriate nit of analysis n the study f internal abor markets.

The important oint to keep in mind here s that the oligopoly/com-petition istinction s definitionally oncernedwith characteristics f in-dustrial market ituations, ot with those of individual firms. n thepresent nalysis, data on firms re averaged at the industry evel andused, along with other ndustry haracteristics, o provide n economic

profile f industry roupings. hus, ndustry s treated here as the majorlocus for variations n competitive tructure s indexed by levels of eco-nomic concentration nd scale, characteristics f product markets, ndcharacteristics f abor markets.

The empirical ndicators f oligopolistic/competitive arket tructureused in this nalysis fall nto one of the three asic categories ntroducedabove: (1) measures f the capacity for oligopoly n an industry, 2)measures f oligopolistic ehavior n the industrial roduct market, nd(3) measures f oligopolistic ehavior n the industrial abor market. As

measures f the capacity for oligopolywe use the traditional measure fmarket oncentration X3) and several measures f economic cale, in-cluding ssets (X2), receipts X13), and number f workers X17). Asmeasures f oligopolistic ehavior n the industrial roduct market weinclude evels of advertising xpenditures X1),,5political contributions(X7), and profit X8). Edwards 1975, p. 21) argues that nternal abormarkets re "a direct ffspring f the consolidation f monopoly apitalistpower nd the consequent mposition f bureaucratic ontrol." n additionto a measure f the relative ize of the bureaucratic ork force Xg), ouranalysis employsmeasures f the extent f internal abor market evel-opment n an industry. he latter nclude unionization X1o), levels of

5Ornstein 1977) examines a variety of measures of advertising, articularly ratiosof advertising o sales. He discovers ittle consistency n the findings f the economicresearch radition. Thus, the simple mean advertising xpenditure s employed here.

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wages (XO,X6, X16), fringe enefits X4),6 and job stability n both theshort un X12, X15) and the onger un X11,X14).

In the initial stages of data collection, he 215 industry ategoriesestablished y the U.S. Bureau of the Census (1971) were employed.For most of the variables of interest, owever, ata were not availablefor uch detailed ndustrial ategories. he industry ategories mployedhere are aggregated o a total of 55 to correspond ith the archival datasources nd allow maximum se of available information.7 he profes-sional and public administration ndustries re consistently mitted runderrepresented n the data sources and are deleted from our initialanalysis.The problem ere s that many of the variables oncerning co-nomic cale and oligopolistic ehavior n product nd labor markets reeither not relevant o these ndustries r not available. (See table 1 fora complete isting f variables nd data sources.) Following discussionof the analysis for heother 5 industries, e shall return o a considera-tion of the professional nd public administrative ategories.

We have noted above that dual economy heory uggests mpiricalregularities n the relationship etween ndustrial apacity for oligopoly(as indexed by economicconcentration nd scale) and indicators foligopolistic ehavior n product nd labor markets. Given this concep-tion of multiple ndicators elating o an underlying imension, he useof factor nalytic procedures eems appropriate. uch an analysis willprovide ests both on the existence f an underlying imension nd onthe conformity f interrelationships mong the indicators o theoreticalexpectations. f both tests are successful, he factor nalysis procedurewill also provide actor coreswhich an be used to specify he economicsegmentation f industry.

The correlations, eans, nd standard eviations or the 17 indicators

are presented n table 2. All of the variables ppear to covary n accor-dancewith heoretical xpectations. he onlynegative elationships nvolvethe "quits" variable, which s as expected.All other variables re posi-tively elated with ne another. n fact, 18 of the correlations xceed0.70and are indicated y asterisks *) in table 2. The multicollinearity n-dicated here s not a problem or he factor olution tself, ut may raiseproblems or our computation f factor cores.Harman (1976, p. 369)

6

Thesebenefits

nclude employer ontributions o pension, annuity, retirement, rofitsharing, tock bonus, health nsurance, nd life nsurance programs.7 In a few instances where discrepancies emained between this industry lassificationand data sources, variable values were allocated on the basis of existing nformation.Data that were too detailed were simply ummed o represent he aggregate ndustrycategory used here. n instances f lack of detail, a weighted disaggregation rocedurewas employed. Either the number of firms r the number of workers n an industrywas used as a weight n an effort o approximate the variable value.

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presents he widely ccepted regression lgorithm or the construction ffactor cores:

B = S' R-l (1)where B is a matrix f scoringweights, is the factor tructure matrix,and R is the correlation matrix. rom (1) we see that the correlationmatrix must be inverted n order o compute actor cores. n the presentcase, the determinant f the correlation matrix R) is 0.12 X 10-11,whichmeans hat R is ill conditioned.8

The redundancies vident mong he variables n table 2 can be elimi-nated by selecting ariables which can stand as proxies for clusters fhighly ntercorrelated ariables.As is evident n table 3, profit nd medianincome rovide he best proxies or redundant ariables. n each instanceof substitution, he proxy variables hare at least 50% variance with thevariableswhich hey epresent.

The results f a factor nalysis n this reduced et of variables ppearin table 4. This solution s unidimensional ith all variables oading onthe factor t 0.42 or higher.9 learly, he variables ovary n a mannerconsistent ith dual economy heory. ndustries with arge values on theeconomic oncentration nd scale variables exhibit haracteristics sso-ciated with product nd labor market owers s well. Factor scoreswerecomputed or this solution, nd these are listed along with the industrycategories n table 5. The highest anking ndustries n the factor coreare petroleum roducts nd motor ehicles. he two owest ndustries re

TABLE 3DISPOSITION OF REDUNDANT VARIABLES

Redundant Variable Proxy for Variable

(X11)P5052....................... (X6)Mincome, Xms)Wklyhrs(X16)Wklywage................... (X6)Mincome, X,5)Wklyhrs(X5)Hrlywage.................... (X6)Mincome(X4)Fringe....................... (X8)Profit, X17)Wnworkrs(XI)Adv......................... (X8)Profit(X7)Polcont...................... (X8)Profit(X2)Assets....................... (X8)Profit(X13) eceipts .................... (X8)Profit

8 A factor analysis on all 17 variables produced an oblique (promax) solution withtwo factors correlated t .40, accounting for 72.0% of the variance. One factor wasdominated by the economicscale and product market variables and the other by thelabor market characteristics. roportion of supervisory personnel, tenure, and con-centration were weighted moderately on both factors. Although consistent with ex-pectations derived from dual economy theory, the solution nevertheless producedhighly unstable scoring weights and for this reason was not used.9Factors were retained f the eigenvalues were greater than 1.0 following principalaxis iteration.

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TABLE 4RESULTS OF FACTOR ANALYSIS ON NONREDUNDANTVARIABLES

Factor Commu- ScoringVariable Pattern nality Weight

X3 Concen ............ .721 .521 .180X6 Mincome* ......... .767 .588 .133X8Profitt ............ .478 .228 .095X9Psuper ............ .709 .503 .158XioPunion ........... .457 .209 .044X12Quits . .......... -.424 .179 -.060X14Tenure ........... .598 .358 .130X15Wklyhrst ......... .770 .593 .246X17Wnworkrs? ........ .598 .358 .156Eigenvalue ........... 3.538

* Servesas proxy orP5052, Wklywage, Hrlywage.t Serves as proxy orFringe, Adv, Polcont, Assets, Receipts.t Serves as proxy for P5052 and Wklywage.? Serves as proxy orFringe.

in retail trade: apparel sales and eating and drinking laces. The meanof the factor core distribution s zero by construction. he symmetryof the distribution skewness= 0.17), however, s not a technical rtifact

but an interesting mpirical utcome. t indicates hat the variables m-ployed here are effective n differentiating niformly mong a variety findustries.

SPECIFICATION OF ECONOMIC SEGMENTATION

There are two distinct pproaches o the use of economic egmentationdata in the analysis f social structure nd process.The emphasis n thepresent aper follows Beck et al. (1978) in interpreting conomic eg-mentation s a contextual actor, which operates n such a way as tocondition he effects f basic socioeconomicrocesses n individualwork-ers. Such an interpretation, hichwe have associated with the dual econ-omy perspective, alls for a categorical istinction etween ompetitiveand oligopolistic ndustries n that basic socioeconomic rocesses re ex-pected o differ or ligopolistic nd competitive nvironments.

A secondapproach to the use of economic egmentation ata empha-sizesthe distinction etween structural" ariables, uch as the economic

organization f industry, nd "individual" variables, uch as educationand social background actors see, e.g., Bibb and Form 1977). So longas the relationship etween uch structural nd individual variables sassumed obe additive, esearchers ay prefer o avoid any possible ossof information ue to categorizing ata on industrial ifferentiation ndrely nstead on a quantitative measure of the level of competition/oli-

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gopoly n the various ndustries. n the following, e define womeasuresof economic egmentation, ne appropriate o each of these research trat-

egies, nd illustrate he application f these measures o analysis f simpleearnings etermination odels.Our first ask is to use the factor nalysis reported bove to classify

industries nto core and periphery ectors. Other things being equal, aconventional oint at which to split a symmetric istribution ould bethe mean of the distribution in this case, zero). However, he data intable 5 exhibit large break in the distribution ust below the mean.Since there s no comparable iscontinuity n the central art of the dis-tribution, e use this point rather han the mean to divide industries

into a core sector > - 0.06) and a periphery ector < - 0.28).As mentioned bove, this preliminary ectoral ssignment xcludes ro-fessional ervices nd public administration rom he factor nalysis be-cause of the unavailability r questionable elevance f most of the in-dustrial ndicators or them. Rather than exclude these ndustries romour sectoral pecification, e will assign them nitially o the core sectoron the grounds hat the structure f the professions nd public adminis-tration ffectively nsulates hem from highly ompetitive arket truc-ture.

Another esult f limitations n the availability f data on industrialcharacteristics s the aggregation f 215 detailed census ndustrial ate-gories nto 55 broad industrial ategories. One negative onsequence fthis aggregation s the creation f a few relatively eterogeneous ate-gories.For example, he transportation ategory ncludes axi companiesas well as airlines,whilewholesale rade ncludes rugs nd chemicals swellas scrap nd waste materials. n an effort o reduce his heterogeneityand also to provide check on our "arbitrary" ssignment f the pro-fessional nd public administration ndustries, e turn to the only twoindicators vailable for detailed ndustry ategories:median ncome U.S.Bureauof the Census 1973) and profit Internal RevenueService1972b).These data on a more detailed ndustrial reakdown 112 industry ate-gories and 21 professional nd public administration ategories) allowidentification f more detailed core/periphery ndustry lacements withuncharacteristically ighor low levels of either rofit r income nd ad-justment f sectoral lacement. hese adjustments rovided new sectorallocations for 10 of 21 professional nd public administration ndustriesand for

11of

122 other ndustries.10 he final dichotomous ectoral dis-tinction s presented n table 6.

10Detailed industry ategories were reallocated from the core sector to the peripheryif their verage profit was less than $35,000 or if their workers' median annual incomewas less than $5,000. For the professional nd public administration ategories, nlythe median income criterion was used, since profit data are neither available nor

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Construction f a quantitative ndex of industrial ifferentiation e-quires n adjustment f the factor cores n table 5 to include rofessional

and public administration ategories.As noted above, only one of thenine ndicators median ncome) used in the factor olution s availablefor these two industries. o compute factor cores for professional ndpublic administration ategories, e use the standardized median ncomedata and the overall mean values for all other variables i.e., zero instandardized orm n the factor olution). Applying factor weights othese values, we obtain index estimates f -0.07 for the professionalcategory nd 0.10 for public administration. n addition o the raw factorscores, able6 presents escaled cores hat vary between and 100.

THE IMPORT OF ECONOMIC SEGMENTATION

Thus far we have reviewed he historical oundation f theories f eco-nomic egmentation, dentified set of relevant mpirical ndicators, nddefined wo empiricalmeasures f economic egmentation, ne based ona dichotomousmodelof economic ectors nd the other based on a con-ception of economic egmentation s a continuum anging rom highlyoligopolistic ohighly ompetitive. t remains o illustrate he substantiveimport f these measures or the analysis of socioeconomic rocesses. odo this we present nalyses of a simple model of individual arningsdetermination or sampleof the experienced ivilian abor force n theUnited States, drawn from he March 1976 Current opulation Survey.This subset consists f all individuals ge 16 or older who either werecurrently mployed r had worked n the preceding iveyears and wereseeking mployment N 62,568).

Turning first o our dichotomous ectoral model, table 7 presents e-scriptive tatistics y sectors for a set of relevant ocial and economicvariables.The reader will note that there re significant ifferences e-tween he two economic ectors orall of these variables.The two mea-

relevant for such industries. Detailed industry ategories were moved from the pe-riphery ector o the core f profits xceeded$300,000or the median ncome of workerswas greater han $7,500. Industries moved to the periphery nclude (1) manufactur-ing: miscellaneous plastics; (2) transportation: buses, taxicabs, and miscellaneoustransportation ervices; (3) utilities: water and other sanitary ervices; and (4) pro-fessional services: hospitals, convalescent institutions, elementary and secondaryschools, colleges and universities, ibraries, ducational services, museums, religiousorganizations, welfare services, and nonprofit organizations. In the 55-categoryscheme, the miscellaneous manufacturing ndustries ategory ncludes ordnance. Thedetailed data indicate that ordnance has quite high profit nd median worker ncome,while the remaining miscellaneous ndustries closely resemble periphery ndustries.Thus, ordnance was left in the core and the miscellaneous category was moved tothe periphery. ndustries moved to the core include (1) manufacturing: extile finish-ing and dyeing and leather footwear; and (2) wholesale trade: drugs and chemicals,electrical goods, metals and minerals, nd alcoholic beverages.

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TABLE 5RANKING OF INDUSTRIES BYFACTOR SCORE*

Industry Factor Score

Nmfg: petroleum roducts ................... . 2.40Dmfg: motor vehicles .......... .................. 2.21Dmfg: primary metal ............................ 1.31Nmfg: hemical nd allied products ................ 1.30Dmfg: transportation quipment ..... ............. 1.25Mining:petroleum nd natural gas ..... ........... .99Nmfg: paper and allied products .................. .92Utilities nd sanitary ervices..................... .87Nmfg: obacco.................................. .86Dmfg: professional nd photographic quipment.. . .85Dmfg: electricalmachinery ...... ................ .83Dmfg: machinery, xcept electrical ................ .81Mining: nonmetallic uarrying ...... .............. .68

Communications ............ .................... .68Mining: metal ores ........... ................... .64Mining: coal .................................... .60Dmfg: stone, clay, glass products .................. .46Transportation .................................. .45Dmfg: fabricated metal ........ .................. .43Nmfg: food,kindred roducts ..................... .42Finance: security, ommodity rokerage............ .38Miscellaneousmanufacturing ..................... .31Nmfg: printing nd publishing ...... .............. .29Nmfg: rubber nd miscellaneous lastics. .27Const: general, xcept building .................... .26Wh Tr: machinery, quipment, upplies ............ .16Finance:

banking ................................ .06Const: general building ........................... .05Const: special trade contractors ................... .05Finance: credit genciesother than banks ........... .03Finance: insurance ............................... -.01Wh Tr: groceries nd food.- .06Nmfg: extile mill products ....... ................ - .28Finance: real estate ............................... - .30Agricultural ervices .......... ................... -.39Dmfg: furniture ................................. -.47Dmfg: umber nd wood.......................... -.48Agricultural roduction ........ .................. - .56Wh Tr: miscellaneouswholesaletrade .............. -.58Bus Serv: advertising ............................ -.61Nmfg: eather products ............................ - .63Rt Tr: building materials ......................... - .68Rt Tr: furniture, omeequipment ................. -.86Rt Tr: auto sales, service tations ..... ............ -.88Nmfg: pparel products ........ .................. -.92Bus Serv: miscellaneous usiness services........... -.94Bus Serv: auto repair ..... ............ -1.00Entertainment nd recreation ervices.............. -1.03Rt Tr: miscellaneous etail trade .................. -1.04Rt Tr: food stores ...... .......................... -1.13Rt Tr: general merchandise....................... -1.43Hotels and motels .............. ................. -1.45Other personal ervices........................... -1.52Rt Tr: apparel ........ ....... -1.61Rt Tr: eating and drinking laces ..... ............ -1.93

NOTE.-X = .43 X 10-7; SD = .93; SK = .17.* Key to abbreviations: Nmfg nondurable manufacturing; mfg du-

rable manufacturing; onst = construction; h Tr = wholesale rade; Bus Servbusiness ervices;Rt Tr = retail rade.

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TABLE 6INDUSTRIES, DETAILEDCENSUS CODES, SECTORALASSIGNMENT,

AND CONTINUOUSSEGMENTATION INDEX

1970Census Factor ScaledIndustry Code Sector* Index Indext

Agriculture, orestry, isheries:Agricultural roduction ............. 017 Periphery -.56 32Agricultural ervices.............. 018-28 Periphery -.39 36

Mining:Metal mining ...................... 047 Core .64 59Coal mining ....................... 048 Core .60 58Crude petroleum nd natural gas ..... 049 Core .99 67Nonmetallic mining nd quarrying..... 057 Core .68 60

Construction:General building ontractors ......... 067 Core .05 46General contractors, xcept building. . 068 Core .26 51Specialtrade contractors ............ 069 Core .05 46Not specified onstruction ........... 077 Core .05 46

Manufacturing-durable goods:Lumber and wood products .......... 107-9 Periphery -.48 33Furniture nd fixtures .............. 118 Periphery -.47 34Stone, clay, and glass products ....... 119-38 Core .46 55Primary metal ..................... 139-49 Core 1.31 75Fabricated metal products ........... 157-69 Core .43 55Machinery, xcept electrical ......... 177-98 Core .81 63Electrical machinery, quipment ..... 199-209 Core .83 64Motor vehicles nd equipment ....... 219 Core 2.21 96Other tiansportation quipment ...... 227-38 Core 1.25 73

Professional, hotographic, atches ... 239-57 Core .85 64Ordnance ... 258 Core .31 52Miscellaneousmanufacturing ....... . 259,398 Periphery .31 52

Manufacturing-nondurable oods:Food and kindred roducts .... ...... 268-98 Core .42 55Tobacco manufacturers ............. 299 Core .86 64Textile-knitting mills 3 0 307 Periphery -.28 38Textile-dyeing and finishing308 Core -.28 38Textile-floor covering.............. 309 Periphery -.28 38Textile-yarn, thread, abricmills 317 Core -.28 38Textile-miscellaneous products 318 Periphery -.28 38Apparel and other related products ... 319-27 Periphery -.92 23Paper and allied products ............ 328-37 Core .92 66Printing, ublishing ................. 338-39 Core .29 51Chemicalsand allied products ........ 347-69 Core 1.30 75Petroleum nd coal products ......... 377-78 Core 2.40 100Rubber products ................... 379 Core .27 51Miscellaneousplastic products ....... 387 Periphery .27 51Tanned, curried, nd finished eather . 388 Periphery -.63 30Footwear, except rubber ............. 389 Core -.63 30Leather products, xcept footwear . . 397 Periphery -.63 30

Transportation, ommunications, ndother public utilities:

Railroads and railway xpress ........ 407 Core .45 55Street railways nd bus lines ......... 408 Periphery .45 55Taxicab service ........ ............ 409 Periphery .45 55Trucking ervice.................... 417 Core .45 55Warehousing nd storage ............ 418 Core .45 55Water transportation ............. 419 Core .45 55Air transportation .................. 427 Core .45 55Pipelines, xcept natural gas .... ..... 428 Core .45 55Services ncidental o transportation . 429 Periphery .45 55Communications ......... .......... 447-49 Core .68 60Electric, gas, and steam power ....... 467-69 Core .87 65Water, anitary, nd other utilities .... 477-79 Periphery .87 65

* Seetext or rocedures sedto allocate ndustry osectors.t Rescaled o range rom to 100.


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TABLE 6 (Continued)

1970Census Factor Scaled

Industry Code Sector* Index Indext

Wholesale trade:Motor vehicles nd equipment .... . 507 Periphery -.58 31Drugs, chemicals, llied products ..... 508 Core -.58 31Dry goods and apparel .............. 509 Periphery -.58 31Food and related products ........... 527 Core -.06 43Farm products-raw materials ....... 528 Periphery -.58 31Electrical goods ..... I ......I...I.I... 529 Core -.58 31Hardware, plumbing, eating upplies. 537 Periphery -.58 31Not specified lectrical, ardware..... . 538 Periphery -.58 31Machinery, quipment nd supplies ... 539 Core .16 48Metals and minerals, .e.c.c......... 557 Core -.58 31Petroleum products ................. 558 Periphery -.58 31Scrap and waste materials ........... 559 Periphery -.58 31Alcoholicbeverages................. 567 Core -.58 31Paper and its products .............. 568 Periphery -.58 31Lumber and construction materials. 569 Periphery -.58 31Wholesalers, ot specified, .e.c....... 587-88 Periphery -.58 31

Retail trade:Lumber, buildina materials, hardware.. 607-08 Periphery -.68 29Department, eneral merchandise tores 609-27 Periphery -1.43 12Food stores ........................ 628-38 Periphery -1.13 18Motor vehicles, gasoline, ccessories.. 639-49 Periphery -.88 24Apparel and shoe stores ..... ........ 657-58 Periphery -1.61 07Furniture, ousehold ppliances ...... 667-68 Periphery -.86 25Eating and drinking laces .... ...... 669 Periphery -1.93 00Other retail trade .................. 677-98 Periphery -1.04 21

Finance, nsurance, nd real estate:Banking....:...................... 707 Core .06 46Credit agencies..................... 708 Core .03 45Security brokerage nd investment .. 709 Core .38 53Insurance ......................... 717 Core -.01 44Real estate .......... 718 Periphery -.30 38

Businessand repair ervices:Advertising........................ 727 Periphery -.61 30Automobile epair .................. 757 Periphery -1.00 21Other business ervices.............. 728-49, Periphery -.94 23

758-59Personal services:

Hotels and motels .................. 777 Periphery -1.45 11

Other personal services.............. 769, 778-98 Periphery -1.52 09Entertainment nd recreation ervices ... 807-9 Periphery -1.03 21Professional nd related ervices:

Offices f physicians, entists, racti-tioners, nd health services ........ 828-37, Core -.07 43

847-48Hospitals, convalescent nstitutions ... 838-39 Periphery -.07 43Legal services...................... 849 Core -.07 43Educational services ................ 857-68 Periphery -.07 43Museums and other nonprofit irms.... 869-87 Periphery -.07 43Engineering nd architectural irms.... 888 Core -.07 43Accounting nd auditing ervices ..... 889 Core -.07 43Miscellaneousprofessional ervices .... 897 Core -.07 43

Public administration .................907-37

Core.10

47

1111


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sures f financial ell-being, nnual arnings nd the natural og of annualearnings, oth differ ubstantially etween ectors. Core workers learly

earn more han their ounterparts n the periphery. he sex compositionof the two sectors also differs onsiderably. emales constitute nly29.32% of the core, while they dominate the periphery abor force(53.86%). Furthermore, larger roportion f the periphery s nonwhite(11.2% vs. 9.01% in the core). Thus, workers n the core are morelikely o be white, male, and financially dvantaged han workers n theperiphery. he other variables n table 7, years of schooling nd occu-pationalprestige, lso vary by sector. Although he difference n schoolingis less than one year, core workers o have significantly ore schooling

than periphery orkers. relatively arge discrepancy xists between hetwo sectors n mean occupational restige 40.35 for the core and 36.12for heperiphery).

The last column f table 7 presents he zero-order orrelations etweeneach of the variables nd our continuousmeasure f economic egmenta-tion. The highest orrelations ere are for the earnings ariables, withdecreasing orrelations or ex, occupational restige, chooling, nd race,in that order. These results ndicate hat the continuous nd dichotomoussegmentation easures have roughly omparable elationships ith theindividual ariables. he biserial orrelation etween he dichotomous ndcontinuousmeasures s 0.87.

In introducing he two measures of industrial egmentation, e em-

TABLE 7DESCRIPTIVE STATISTICS FROM1976CPS BY DICHOTOMOUS AND

CONTINUOUS SEGMENTATION INDICES

CORRE-LATION

MEANS BY SECTOR WITHCONTI.-

Core Periphery uousCHARACTERISTIC (N = 27,918) (N = 34,658) t-ratio INDEX

Annual earnings ............ 10,637.957 6,198.071 -76.132* .296*(8,077.570) (6,627.535)

In annual earnings .......... 8.828 7.877 -67.844* .289*(1.434) (1.956)

Sex (1=male) ............... .707 .461 -63.639* .287*(.455) (.498)

Race (1= white) ............ .910 .888 -9.030* .026*(.286) (.315)Years of schooling .......... 12.348 12.287 -2.564* .075*

(2.770) (3.096)Occupationalprestige ....... 40.353 36.116 -37.184* .237*

(13.101) (14.970)

NOTE.-Standard errors n parentheses.*P

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phasized that the choice between hem should rest on conceptual on-siderations. he dichotomousmeasure will be more appropriate or re-

search n social and economic rocesses hought o be conditioned y theeconomic rganization f ndustry. n such work researchers ay be will-ing to sacrifice etail on the degree of competitiveness/oligopolism nexchange or he clarity f contrast etween ndustry roups haracterizedby oligopoly s opposed to competition. he continuous measure, n con-trast, reats unit difference n economic ifferentiation s equivalent nomatter where n the scale t appears. Usersof this variablemust be willingto give up the clarity f contrast etween ompetitive nd oligopolisticgroups n return or he detail on levels of competition/oligopoly.

Because of the adjustments o detailed ndustrial ategories sed toconstruct he sectoral measure, hat measure does not represent simpledichotomization f the continuous measure. Still, t may be instructiveto compare he application f the two measures o a simple model ofearnings determination onsisting f a set of individual characteristicsfrom he CPS survey. The data for these comparisons re presented ntable 8. Model 1 presents baseline arnings model containing ex, race,occupational restige, ork xperience,1" nd schooling. Models 2 and 3,respectively, dd to this baseline arnings model he dichotomous nd con-tinuous measures of economic egmentation eveloped above. Finally,model4 presents covariance esign hat allows for the existence f dif-ferences n the earnings etermination rocessbetween ectors, sing thedichotomous ector ariable.

Comparingmodel 1 with models2 and 3, we see that the addition feither measure of economic egmentation epresents significant ncre-ment o the explanatory ower of the baseline model containing nly n-dividual variables. While models 2 and 3 are roughly omparable nexplanatory ower, model4 suggests hat the assumption f homogeneityin earnings eturns o individual haracteristics ay not be warranted.Each of the characteristics ncluded n the baselinemodelhas effects hichvary according o sectoral ocation. All of these effects re greater n thecore than n the periphery, ith all slope differences eing significant tthe 001 level.

We interpret heseresults s confirming he utility f a dichotomoussectoralmeasure for analysisof the effects f economic egmentation n

11 Work experience for males is defined as experience(age

-schooling 5). Forfemales this expression s adjusted to take account of lower labor force participation,

using parameters stimated rom he National Longitudinal Survey. These adjustmentsare discussed n detail in Beck, Horan, and Tolbert (1979).

white ever-married emales: experience 0.5483 (age - schooling 5)white never-married emales: experience 0.8757 (age - schooling 5)nonwhite ver-married emales: experience 0.6164 (age - schooling 5)nonwhite never-married emales: experience 0.7731 (age - schooling 5)

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socioeconomicrocesses.n cases where conomic egmentation s assumedto have only additive ffects n the variablesunder analysis, esearchers

may choose ither ichotomous r continuousmeasureswithout ubstantialloss of explanatory ower. n cases where researchers xpect qualitativedifferences etween conomic ectors n relationships mongvariables, hedichotomous easurewill facilitate covariance esign.

The apparent mportance f dual economy heory or ocial stratifica-tion warrants urther esearch ctivity imed at developing coherentresearch radition. ne prerequisite o such coherence s the developmentof empiricalmeasures for basic concepts. n this paper we provide anempirical pecification f economic egmentation hich ombines rangeof theoretically elevant ndicatorswith the best available data sources.We would be the last to claim that our findings hould be interpretedas final, or written n stone.12 Other analyses using different ariablesor data might well obtain different olutions r cutting oints. Nonethe-less,over the course f the present nalysis we have been impressed iththe stability f the basic solution ver variations n choice of variables.The final demonstration f the efficacy f the measures f economic eg-mentation resented ere must necessarily est on future pplications n

research n social stratification nd mobility.

REFERENCES

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Bibb, Robert, and William H. Form. 1977. "The Effects of Industrial, Occupationaland Sex Stratification n Wages in Blue-Collar Markets." Social Forces 55 (June):974-96.

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Heath.Harman, Harry H. 1976. Modern Factor Analysis. 3d ed. Chicago: University f Chi-cago Press.

Harrison, Bennett. 1972.Education, Training, nd the Urban Ghetto. Baltimore: JohnsHopkins University ress.

Hodson, Randy D. 1977. "Labor Force Participation nd Earnings n the Core, Peri-pheral, and State Sectors of Production." M. A. thesis. University f Wisconsin-Madison.

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Horan, Patrick M., Charles Tolbert, and E. M. Beck. 1979. "Occupational Differentia-tion in a Dual Economy." Paper presented t the annual meeting of the SouthernSociological Society, Atlanta.Internal Revenue Service. 1972a. Statistics of Income, 1972: Business Tax Returns.Washington, .C.: Government rinting Office.

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Oster, Gerry. 1979. "A Factor Analytic Test of the Theory of the Dual Economy."Review of Economics and Statistics 61 (February): 33-39.

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1970. Market Power and Economic Welfare. New York: Random House.1979. The Economics of Industrial Organization. Englewood Cliffs, N.J.:

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Vietorisz, homas, and Bennett Harrison. 1970. The Economic Development of Harlem.New York: Praeger.

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