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Skill Loss, Ranking of Job Applicants and the Dynamics of Unemployment

Author

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  • Eriksson Stefan

    (Uppsala University, Uppsala, Sweden)

Abstract

This paper investigates the consequences of skill loss as a result of unemployment in an efficiency wage model with turnover costs and on-the-job search. Firms are unable to differentiate wages and therefore prefer to hire employed searchers or unemployed workers who have not lost human capital. It is shown that if some fundamental factor in the economy changes, this will result in a lengthy adjustment process with substantial long-run unemployment effects. Moreover, the model is capable of generating persistence, but the amount depends on the duration of the shock itself.

Suggested Citation

  • Eriksson Stefan, 2006. "Skill Loss, Ranking of Job Applicants and the Dynamics of Unemployment," German Economic Review, De Gruyter, vol. 7(3), pages 265-296, August.
    • Handle: RePEc:bpj:germec:v:7:y:2006:i:3:p:265-296
    DOI: 10.1111/j.1468-0475.2006.00156.x
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    Cited by:

    1. Khalifa, Sherif, 2015. "Learning-by-doing and unemployment dynamics," Economic Modelling, Elsevier, vol. 44(C), pages 180-187.

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