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Unemployment and Endogenous Growth with Capital-Skill Complementarity

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  • Eva, MORENO-GALBIS

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES) and DELTA, Paris)

Abstract

We construct an endogenous growth intertemporal general equilibrium model with two types of jobs and two types of workers. We allow for job competition between high- and low skilled workers on the low-skilled segment of the labor market and for on-the-job search for high skilled workers. Matching processes are represented by matching functions à la Pissarides. Workers search intensities are endogenous. We distinguish between embodied and disembodied technological progress and endogenize them through a learning by doing process based on capital accumulation. Social returns to capital are imposed to be constant. Biased technological change is introduced via embodied technical progress and new technologies-skill complementarity relationship. The model reproduces quite well the producivity slowdown puzzle, the unemployment rate evolutions and the relative wage stability observed over the last decades. It suggests strong interactions between embodied technological progress, biased technological change, discouragement effects on job competition.

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Bibliographic Info

Paper provided by Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) in its series Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) with number 2004001.

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Length: 44
Date of creation: 01 Feb 2004
Date of revision:
Handle: RePEc:ctl:louvir:2004001

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Keywords: skill mismatch; equilibrium unemployment; ladder effect; macro dynamics; endogneous growth; productivity slowdown; learning by doing;

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References

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  1. Felix Fitzroy & Michael Funke, 1994. "Capital-Skill Complementarity in West German Manufacturing," CRIEFF Discussion Papers 9408, Centre for Research into Industry, Enterprise, Finance and the Firm.
  2. Raouf Boucekkine & Fernando del Río & Omar Licandro, 2003. "Embodied Technological Change, Learning-by-doing and the Productivity Slowdown," Scandinavian Journal of Economics, Wiley Blackwell, vol. 105(1), pages 87-98, 03.
  3. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-37, October.
  4. Per Krusell & Lee E. Ohanian & JosÈ-Victor RÌos-Rull & Giovanni L. Violante, 2000. "Capital-Skill Complementarity and Inequality: A Macroeconomic Analysis," Econometrica, Econometric Society, vol. 68(5), pages 1029-1054, September.
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  9. Postel-Vinay, Fabien, 1998. "Transitional dynamics of the search model with endogenous growth," Journal of Economic Dynamics and Control, Elsevier, vol. 22(7), pages 1091-1115, May.
  10. Timothy F. Bresnahan & Erik Brynjolfsson & Lorin M. Hitt, 2002. "Information Technology, Workplace Organization, And The Demand For Skilled Labor: Firm-Level Evidence," The Quarterly Journal of Economics, MIT Press, vol. 117(1), pages 339-376, February.
  11. Dolado, Juan J. & Jansen, Marcel & Jimeno, Juan F., 2002. "A Matching Model of Crowding-Out and On-the-Job Search (with an Application to Spain)," IZA Discussion Papers 612, Institute for the Study of Labor (IZA).
  12. Bean, Charles & Pissarides, Christopher, 1993. "Unemployment, consumption and growth," European Economic Review, Elsevier, vol. 37(4), pages 837-854, May.
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  17. Bat COCKX & Muriel DEJEMEPPE, 2002. "Do the Higher Educated Unemployed Crowd out the Lower Educated Ones in a Competition for Jobs ?," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2002020, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  18. Olivier, Pierrard & Henri R., Sneessens, 2002. "Low-Skilled Unemployment, Biased Technological Shocks and Job Competition," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2003014, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES), revised 03 May 2002.
  19. Brauninger, Michael & Pannenberg, Markus, 2002. "Unemployment and productivity growth: an empirical analysis within an augmented Solow model," Economic Modelling, Elsevier, vol. 19(1), pages 105-120, January.
  20. Merz, Monika, 1995. "Search in the labor market and the real business cycle," Journal of Monetary Economics, Elsevier, vol. 36(2), pages 269-300, November.
  21. Patacchini, Eleonora & Zenou, Yves, 2003. "Search Intensity, Cost of Living and Local Labour Markets in Britain," CEPR Discussion Papers 3722, C.E.P.R. Discussion Papers.
  22. Andolfatto, David, 1996. "Business Cycles and Labor-Market Search," American Economic Review, American Economic Association, vol. 86(1), pages 112-32, March.
  23. Eva, MORENO GALBIS, 2002. "Changes in the skill structure of the labour force. An empirical application to the Spanish case," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2002035, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  24. R.A. Brecher & Z. Chen & E.U. Choudhri, 2000. "Unemployment and Growth in the Long Run: An Efficiency-Wage Model with Optimal Savings," Carleton Economic Papers 00-01, Carleton University, Department of Economics, revised Sep 2002.
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