This paper develops a matching model of the labour market under wage rigidity when hiring decisions are irreversible. There are two types of workers, the skilled and the unskilled. The model is used to analyse whether technological advances may have increased unemployment, and shows that this is likely to occur if technological change is associated with an increase in the productivity and/or the supply of skilled relative to unskilled workers. These effects are stronger when hiring decisions are more irreversible.
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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number
689.
Find related papers by JEL classification: E24 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials J63 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Turnover; Vacancies; Layoffs
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