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Technical skill bias as a response of firms to unemployment: A matching model with applicant ranking and endogenous skill requirements

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  • Gavrel, Frédéric

Abstract

This paper considers an economy with heterogeneous workers where identical firms optimally decide on the degree of complexity of jobs. Meetings are depicted by an urn-ball process where firms rank their applicants and pick the best one. We show that a general rise in unemployment induces an increase in the employment shares of high-skilled workers which, in turn, makes firms choose more complex jobs, leading then to a decrease in the output of low-skilled workers. The technical skill bias is therefore related to the usual explanations of unemployment. Next, we state that a decentralized equilibrium is efficient in terms of job complexity but inefficient in terms of job creation when firms internalize the usual congestion effect. We then extend the analysis to a dynamic model.

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Bibliographic Info

Article provided by Elsevier in its journal Labour Economics.

Volume (Year): 16 (2009)
Issue (Month): 3 (June)
Pages: 304-310

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Handle: RePEc:eee:labeco:v:16:y:2009:i:3:p:304-310

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Web page: http://www.elsevier.com/locate/labeco

Related research

Keywords: Endogenous job complexity Applicant ranking Matching Differentiation of skills Wage inequality Labor market efficiency;

References

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  1. Stephen Nickell, 2004. "Poverty And Worklessness In Britain," Economic Journal, Royal Economic Society, vol. 114(494), pages C1-C25, 03.
  2. Hungerbühler, Mathias & Lehmann, Etienne & Parmentier, Alexis & Van der Linden, Bruno, 2005. "Optimal Redistributive Taxation in a Search Equilibrium Model," IZA Discussion Papers 1460, Institute for the Study of Labor (IZA).
  3. Acemoglu, Daron, 1996. "Changes in Unemployment and Wage Inequality: An Alternative Theory and Some Evidence," CEPR Discussion Papers 1459, C.E.P.R. Discussion Papers.
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  5. Acemoglu, Daron, 2001. "Good Jobs versus Bad Jobs," Journal of Labor Economics, University of Chicago Press, vol. 19(1), pages 1-21, January.
  6. David H. Autor & Lawrence F. Katz & Alan B. Krueger, 1998. "Computing Inequality: Have Computers Changed The Labor Market?," The Quarterly Journal of Economics, MIT Press, vol. 113(4), pages 1169-1213, November.
  7. Daron Acemoglu, 2002. "Technical Change, Inequality, and the Labor Market," Journal of Economic Literature, American Economic Association, vol. 40(1), pages 7-72, March.
  8. Blázquez, Maite & Jansen, Marcel, 2008. "Search, mismatch and unemployment," European Economic Review, Elsevier, vol. 52(3), pages 498-526, April.
  9. Christopher A. Pissarides & Barbara Petrongolo, 2001. "Looking into the Black Box: A Survey of the Matching Function," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 390-431, June.
  10. Ramon Marimon & Fabrizio Zilibotti, 1997. "Unemployment vs. mismatch of talents: Reconsidering unemployment benefits," Economics Working Papers 211, Department of Economics and Business, Universitat Pompeu Fabra.
  11. Albrecht, James W. & Gautier, Pieter A. & Vroman, Susan B., 2003. "Matching with multiple applications," Economics Letters, Elsevier, vol. 78(1), pages 67-70, January.
  12. Holmlund, B., 1997. "Unemployment Insurance in Theory and Practice," CEPR Discussion Papers 380, Centre for Economic Policy Research, Research School of Economics, Australian National University.
  13. Moen, Espen R, 1997. "Competitive Search Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 385-411, April.
  14. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, December.
  15. James Albrecht & Susan Vroman, 2002. "A Matching Model with Endogenous Skill Requirements," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(1), pages 283-305, February.
  16. Daron Acemoglu, 1998. "Why Do New Technologies Complement Skills? Directed Technical Change And Wage Inequality," The Quarterly Journal of Economics, MIT Press, vol. 113(4), pages 1055-1089, November.
  17. Hosios, Arthur J, 1990. "On the Efficiency of Matching and Related Models of Search and Unemployment," Review of Economic Studies, Wiley Blackwell, vol. 57(2), pages 279-98, April.
  18. James Albrecht, Pieter Gautier, & Susan Vroman, 2003. "Matching with Multiple Applications: The Limiting Case," Working Papers gueconwpa~03-03-25, Georgetown University, Department of Economics.
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Citations

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Cited by:
  1. Léné, Alexandre, 2011. "Occupational downgrading and bumping down: The combined effects of education and experience," Labour Economics, Elsevier, vol. 18(2), pages 257-269, April.
  2. Frédéric Gavrel, 2011. "Is the Formal Sector too Large or too Small? A Reexamination of Minimum Wages in Developing Countries," Economics Working Paper Archive (University of Rennes 1 & University of Caen) 201108, Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS.
  3. Frédéric Gavrel, 2014. "Participation, Recruitment Selection, and the Minimum Wage," Working Papers halshs-00948453, HAL.
  4. Frédéric Gavrel & Jean-Pascal Guironnet & Isabelle Lebon, 2012. "Mismatch, On-the-job Training, and Unemployment," Economics Working Paper Archive (University of Rennes 1 & University of Caen) 201224, Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS.
  5. Gavrel, Frédéric, 2011. "On the efficiency of participation with vertically differentiated workers," Economics Letters, Elsevier, vol. 112(1), pages 100-102, July.
  6. Rose, Giuseppe, 2013. "Endogenous ranking in a two-sector urn-ball matching process," Economics Discussion Papers 2013-40, Kiel Institute for the World Economy.
  7. Gavrel, Frédéric & Lebon, Isabelle & Rebière, Thérèse, 2010. "Wages, selectivity, and vacancies: Evaluating the short-term and long-term impact of the minimum wage on unemployment," Economic Modelling, Elsevier, vol. 27(5), pages 1274-1281, September.
  8. Gavrel, Frédéric, 2012. "On the inefficiency of matching models of unemployment with heterogeneous workers and jobs when firms rank their applicants," European Economic Review, Elsevier, vol. 56(8), pages 1746-1758.

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