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Changes in Unemployment and Wage Inequality: An Alternative Theory and Some Evidence

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  • Daron Acemoglu

Abstract

I present a model where firms decide what types of jobs to create and then search for suitable workers. When there are few skilled workers and the skilled-unskilled productivity gap is small, firms create a single type of job and recruit all workers. An increase in the proportion of skilled workers or skill-biased technical change can create a qualitative change in the composition of jobs, increasing the demand for skills, wage inequality, and unemployment. I provide some evidence that there has been a change in the composition of jobs in the United States during the past two decades.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.89.5.1259
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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 89 (1999)
Issue (Month): 5 (December)
Pages: 1259-1278

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Handle: RePEc:aea:aecrev:v:89:y:1999:i:5:p:1259-1278

Note: DOI: 10.1257/aer.89.5.1259
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  1. Layard, R. & Nickell, S., 1991. "Unemployment in the OECD Countries," Economics Series Working Papers 99130, University of Oxford, Department of Economics.
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