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On the impact of the TFP growth on the employment rate: does training on-the-job matter?

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  • Moreno-Galbis, Eva

Abstract

This paper seeks to gain insights on the relationship between growth and unemployment when considering heterogeneous agents in terms of skills. We allow for the possibility of training for unskilled employed workers and for the possibility of human capital depreciation for skilled unemployed workers. These features are introduced in an endogenous job destruction framework µa la Mortensen and Pissarides (1998). We show that, when growth accelerates, a larger share of unskilled workers gets trained, increasing the incentives of ¯rms to update the job-speci¯c technology, rather than destroying it. The positive impact of growth on the employment rate is then magni¯ed and the predicting ability of the model to reproduce the sensibility of employment with respect to growth too. When calibrated, the model manages to reproduce the aggregate capitalization e®ect estimated on the basis of OECD data. Fur- thermore, whereas for skilled and unskilled workers getting trained growth yields a reduction in the unemployment rates, for unskilled workers not getting trained growth fosters a rise in the unemployment rates.

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Bibliographic Info

Paper provided by CEPREMAP in its series CEPREMAP Working Papers (Docweb) with number 1022.

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Length: 33 pages
Date of creation: Sep 2010
Date of revision:
Handle: RePEc:cpm:docweb:1022

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Keywords: TFP growth; Unemployment; Training; Human Capital Depreciation; Capitalization; Creative Destruction Effect;

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  1. Olivier Blanchard & Justin Wolfers, 1999. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," NBER Working Papers 7282, National Bureau of Economic Research, Inc.
  2. James S. Costain & Michael Reiter, 2003. "Business cycles, unemployment insurance and the calibration of matching models," Economics Working Papers 872, Department of Economics and Business, Universitat Pompeu Fabra, revised Oct 2006.
  3. Pissarides, Christopher & Vallanti, Giovanna, 2005. "The Impact of TFP Growth on Steady-State Unemployment," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5002, C.E.P.R. Discussion Papers.
  4. Langot, François & Moreno-Galbis, Eva, 2008. "Does the Growth Process Discriminate against Older Workers?," IZA Discussion Papers 3841, Institute for the Study of Labor (IZA).
  5. Gómez-Salvador, Ramón & Messina, Julián & Vallanti, Giovanna, 2004. "Gross job flows and institutions in Europe," Working Paper Series, European Central Bank 0318, European Central Bank.
  6. Robert E. Hall, 2005. "Employment Fluctuations with Equilibrium Wage Stickiness," American Economic Review, American Economic Association, American Economic Association, vol. 95(1), pages 50-65, March.
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