The insider-outsider theory of segmented labor markets states that wage discrimination is a factor of changing "tastes" for discrimination.

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The insider-outsider theory primarily focuses on the dynamics between employed workers ("insiders") who have more bargaining power and unemployed individuals ("outsiders") who are trying to enter the labor market. It does not attribute wage discrimination to changing "tastes" for discrimination but rather to the institutional and market forces that protect the positions of insiders at the expense of outsiders.

The Insider-Outsider Theory of Segmented Labor Markets States That Wage