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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. Holmlund, B., 1997. "Unemployment Insurance in Theory and Practice," Papers 1997-25, Uppsala - Working Paper Series.
  2. Maite Blázquez & Marcel Jansen, 2005. "Search, Mismatch and Unemployment," Labor and Demography 0510012, EconWPA.
  3. 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.
  4. 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.
  5. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, December.
  6. Marimon, Ramon & Zilibotti, Fabrizio, 1999. "Unemployment vs. Mismatch of Talents: Reconsidering Unemployment Benefits," Economic Journal, Royal Economic Society, vol. 109(455), pages 266-91, April.
  7. David Autor & Lawrence Katz & Alan Krueger, 1997. "Computing Inequality: Have Computers Changed the Labor Market?," Working Papers 756, Princeton University, Department of Economics, Industrial Relations Section..
  8. Stephen Nickell, 2004. "Poverty And Worklessness In Britain," Economic Journal, Royal Economic Society, vol. 114(494), pages C1-C25, 03.
  9. Coen N. Teulings & Pieter A. Gautier, 2000. "The Right Man for the Job," Tinbergen Institute Discussion Papers 00-038/3, Tinbergen Institute.
  10. Albrecht, James W. & Gautier, Pieter A. & Vroman, Susan B., 2003. "Matching with multiple applications," Economics Letters, Elsevier, vol. 78(1), pages 67-70, January.
  11. Daron Acemoglu, 2000. "Technical Change, Inequality, and the Labor Market," NBER Working Papers 7800, National Bureau of Economic Research, Inc.
  12. Acemoglu, Daron, 1997. "Why Do New Technologies Complement Skills? Directed Technical Change and Wage Inequality," CEPR Discussion Papers 1707, C.E.P.R. Discussion Papers.
  13. 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.
  14. Moen, E.R., 1995. "Competitive Search Equilibrium," Memorandum 37/1995, Oslo University, Department of Economics.
  15. Acemoglu, Daron, 2001. "Good Jobs versus Bad Jobs," Journal of Labor Economics, University of Chicago Press, vol. 19(1), pages 1-21, January.
  16. Mathias Hungerb�hler & Etienne Lehmann & Alexis Parmentier & Bruno Van Der Linden, 2006. "Optimal Redistributive Taxation in a Search Equilibrium Model," Review of Economic Studies, Oxford University Press, vol. 73(3), pages 743-767.
  17. Daron Acemoglu, 1999. "Changes in Unemployment and Wage Inequality: An Alternative Theory and Some Evidence," American Economic Review, American Economic Association, vol. 89(5), pages 1259-1278, December.
  18. 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.
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Citations

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Cited by:
  1. 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.
  2. Frederic Gavrel, 2014. "Participation, Recruitment Selection, and the Minimum Wage," Working Papers halshs-00972289, HAL.
  3. 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.
  4. Gavrel, Frédéric, 2011. "On the efficiency of participation with vertically differentiated workers," Economics Letters, Elsevier, vol. 112(1), pages 100-102, July.
  5. Frédéric Gavrel, 2011. "On the Inefficiency of Matching Models of Unemployment with Heterogeneous Workers and Jobs when Firms Rank their Applicants," Economics Working Paper Archive (University of Rennes 1 & University of Caen) 201107, Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS.
  6. 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.
  7. Rose, Giuseppe, 2013. "Endogenous ranking in a two-sector urn-ball matching process," Economics Discussion Papers 2013-40, Kiel Institute for the World Economy.
  8. 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.

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