Skill Specific Unemployment with Imperfect Substitution of Skills

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Skill Specific Unemployment with Imperfect Substitution of Skills

Author Info

Runli Xie

Abstract

A 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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Publisher Info
Paper provided by Sonderforschungsbereich 649, Humboldt University, Berlin, Germany in its series SFB 649 Discussion Papers with number SFB649DP2008-024.

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Length: 24 pages
Date of creation: Mar 2008
Date of revision:
Handle: RePEc:hum:wpaper:sfb649dp2008-024

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Find related papers by JEL classification:
E24 - Macroeconomics and Monetary Economics - - Macroeconomics: 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, and Vacancies - - - 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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