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Heterogeneous Labor, Labor Market Frictions and Employment Effects of Technological Change. Theory and Empirical Evidence for the U.S. and Europe

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  • Rubart, Jens

Abstract

During the last two decades the so called IT revolution has led to a diverse pattern of growth and employment in OECD countries. In particular, anglo-saxon economies like the U.S. or the U.K. exhibited high rates of economic performance and low unemployment rates, whereas continental European countries showed low economic growth and high unemployment rates. Based on the findings of Lindquist (2004) that the relative demand for workers of different skills (measured by the variation of educational wage differences) varies significantly over the business cycle, we develop a dynamic general equilibrium model which accounts for skill biased technology shocks as well as for the employment record of labor which is divided into different categories of skills. Furthermore, the labor market is characterized by search and matching frictions which allows us to analyze different kinds of institutional settings which determine the negotiated wage rates as well as the demand for labor of the respective skill group. In particular, the latter assumption enables us to control for stylized facts of continental European labor markets. By confronting our theoretical results to empirical evidences it is shown that labor market frictions are necessary to reproduce empirical findings as the lagged response of output, wages and employment after unanticipated shocks to technology.

Suggested Citation

  • Rubart, Jens, 2006. "Heterogeneous Labor, Labor Market Frictions and Employment Effects of Technological Change. Theory and Empirical Evidence for the U.S. and Europe," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 36783, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
  • Handle: RePEc:dar:wpaper:36783
    Note: for complete metadata visit http://tubiblio.ulb.tu-darmstadt.de/36783/
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    Cited by:

    1. Jens Rubart, 2006. "Dismissal Protection or Wage Flexibility," Computing in Economics and Finance 2006 406, Society for Computational Economics.

    More about this item

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts

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