Skill Specific Unemployment with Imperfect Substitution of Skills
AbstractA large body of literature explains the inferior position of unskilled workers by imposing a structural shift in the labor force skill composition. This paper takes a different approach by emphasizing the connection between cyclical variations in skilled and unskilled labor markets. Using a stylized business cycle model with search frictions in the respective sub-markets, I find that imperfect substitution between skilled and unskilled labor creates a channel for the variations in the sub-markets. Together with a general labor augment- ing technology shock, it can generate downward sloping Beveridge curves. Calibrating the model to US data yields higher volatilities in the unskilled labor markets and reproduces stylized business cycle facts.
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Bibliographic InfoPaper provided by Sonderforschungsbereich 649, Humboldt University, Berlin, Germany in its series SFB 649 Discussion Papers with number SFB649DP2008-024.
Length: 24 pages
Date of creation: Mar 2008
Date of revision:
business cycle; search frictions; skill specific unemployment; skill substitutability;
Find related papers by JEL classification:
- E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-03-15 (All new papers)
- NEP-DGE-2008-03-15 (Dynamic General Equilibrium)
- NEP-HRM-2008-03-15 (Human Capital & Human Resource Management)
- NEP-LAB-2008-03-15 (Labour Economics)
- NEP-MAC-2008-03-15 (Macroeconomics)
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