Labor Supply Dynamics, Unemployment and Human Capital Investments

This file is part of IDEAS, which uses RePEc data

Labor Supply Dynamics, Unemployment and Human Capital Investments

Author Info

Wasmer, Etienne () (ECARES, ULB, Université de Metz, CEPR and IZA, Bonn)

Additional information is available for the following registered author(s):

Etienne Wasmer

Abstract

In the last decades, the OECD labor markets faced important labor supply changes with the arrival of women and the cohorts of the baby-boom. Using a survey where workers declare their true employment experience, this paper argues that these supply trends imply more inexperienced workers. It then investigates the important consequences of this fact on the skill composition of the labor force, between-groups wage inequality and the level of unemployment. The main result is that a labor market with wage rigidities may not recover from such a temporary labor supply shock: with a younger and less experienced labor force, there is higher unemployment among low-experience workers, they do not accumulate enough on-the-job human capital, this reduces in the long-run the supply of skilled (experienced) workers and the demand for unskilled workers. This intertemporal multiplication of supply shocks generates multiple equilibria, and the rigid economy is stuck to the bad equilibrium even after the shock. In a competitive market, in contrast, wage inequality and notably, the wage return to experience becomes higher but there is no persistence of the supply shock. Higher education prevents this intertemporal multiplication of supply shocks.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 463.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length: 28 pages
Date of creation: Mar 2002
Date of revision:
Handle: RePEc:iza:izadps:dp463

Contact details of provider:
Postal: IZA, P.O. Box 7240, D-53072 Bonn, Germany
Phone: +49 228 3894 223
Fax: +49 228 3894 180
Web page: http://www.iza.org

Order Information:
Postal: IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany
Email:

For technical questions regarding this item, or to correct its listing, contact: (Mark Fallak).

Other versions of this item:

Paper
- E Wasmer, 1998. "Labor Supply Dynamics, Unemployment and Human Capital Investments," CEP Discussion Papers dp0411, Centre for Economic Performance, LSE.
- Wasmer, Etienne, 1998. "Labour Supply Dynamics, Unemployment and Human Capital Investments," Seminar Papers 651, Stockholm University, Institute for International Economic Studies. [Downloadable!]
- Wasmer, E., 1998. "Labour Supply Dynamics, Unemployment and Human Capital Investments," Papers 651, Stockholm - International Economic Studies.

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

This paper has been announced in the following NEP Reports:

NEP-ALL-2002-05-03 (All new papers)
NEP-LAB-2002-05-03 (Labour Economics)

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

Nickell, Stephen & Bell, Brian, 1995. "The Collapse in Demand for the Unskilled and Unemployment across the OECD," Oxford Review of Economic Policy, Oxford University Press, vol. 11(1), pages 40-62, Spring.
Pissarides, C., 1988. "Unemployment Consequences Of An Aging Population: An Application Of Insider-Outsider Theory," Papers 327, London School of Economics - Centre for Labour Economics.
Other versions:
- Pissarides, Christopher A., 1989. "Unemployment consequences of an aging population: An application of insider-outsider theory," European Economic Review, Elsevier, vol. 33(2-3), pages 355-366, March. [Downloadable!] (restricted)
E Wasmer, 1998. "Labor Supply Dynamics, Unemployment and Human Capital Investments," CEP Discussion Papers dp0411, Centre for Economic Performance, LSE.
Other versions:
- Wasmer, Etienne, 1998. "Labour Supply Dynamics, Unemployment and Human Capital Investments," Seminar Papers 651, Stockholm University, Institute for International Economic Studies. [Downloadable!]
- Wasmer, Etienne, 2002. "Labor Supply Dynamics, Unemployment and Human Capital Investments," IZA Discussion Papers 463, Institute for the Study of Labor (IZA). [Downloadable!]
- Wasmer, E., 1998. "Labour Supply Dynamics, Unemployment and Human Capital Investments," Papers 651, Stockholm - International Economic Studies.
Mincer, Jacob, 1997. "The Production of Human Capital and the Life Cycle of Earnings: Variations on a Theme," Journal of Labor Economics, University of Chicago Press, vol. 15(1), pages S26-47, January. [Downloadable!] (restricted)
Pissarides, Christopher A, 1992. "Loss of Skill during Unemployment and the Persistence of Employment Shocks," The Quarterly Journal of Economics, MIT Press, vol. 107(4), pages 1371-91, November. [Downloadable!] (restricted)
Olivier J. Blanchard & Lawrence H. Summers, 1986. "Hysteresis and the European Unemployment Problem," Working papers 427, Massachusetts Institute of Technology (MIT), Department of Economics.
Other versions:
- Olivier J. Blanchard & Lawrence H. Summers, 1987. "Hysteresis and the European Unemployment Problem," NBER Working Papers 1950, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
- Olivier J. Blanchard & Lawrence H. Summers, 1986. "Hysteresis And The European Unemployment Problem," NBER Chapters, in: NBER Macroeconomics Annual 1986, Volume 1, pages 15-90 National Bureau of Economic Research, Inc. [Downloadable!]
Jovanovic, Boyan & Nyarko, Yaw, 1994. "The Transfer of Human Capital," Working Papers 94-25, C.V. Starr Center for Applied Economics, New York University. [Downloadable!]
Other versions:
- Boyan Jovanovic & Yaw Nyarko, 1994. "The Transfer of Human Capital," NBER Working Papers 4823, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
- Jovanovic, Boyan & Nyarko, Yaw, 1995. "The transfer of human capital," Journal of Economic Dynamics and Control, Elsevier, vol. 19(5-7), pages 1033-1064. [Downloadable!] (restricted)
David Blanchflower & L Katz & G Loveman, 1993. "A Comparison of Changes in the Structure of Wages in Four OECD Countries," CEP Discussion Papers dp0144, Centre for Economic Performance, LSE.
Other versions:
- Lawrence F. Katz & Gary W. Loveman & David G. Blanchflower, 1995. "A Comparison of Changes in the Structure of Wages in Four OECD Countries," NBER Chapters, in: Differences and Changes in Wage Structures, pages 25-66 National Bureau of Economic Research, Inc. [Downloadable!]
Nickell, S., 1991. "Wages, Unemployment and Population Change," Economics Series Working Papers 99122, University of Oxford, Department of Economics.
McVicar, D. & Rice, P., 2000. "Participation in Further Education in England and Wales: An Analysis of Post-War Trends," Discussion Paper Series In Economics And Econometrics 0014, Economics Division, School of Social Sciences, University of Southampton. [Downloadable!]
Other versions:
- McVicar, Duncan & Rice, Patricia, 2001. "Participation in Further Eduction in England and Wales: An Analysis of Post-War Trends," Oxford Economic Papers, Oxford University Press, vol. 53(1), pages 47-66, January.
Welch, Finis, 1979. "Effects of Cohort Size on Earnings: The Baby Boom Babies' Financial Bust," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages S65-97, October. [Downloadable!] (restricted)
Wasmer, Etienne, 2001. "Measuring human capital in the labor market: The supply of experience in 8 OECD countries," European Economic Review, Elsevier, vol. 45(4-6), pages 861-874, May. [Downloadable!] (restricted)
Saint-Paul, Gilles, 1995. "Labour Market Institutions and the Cohesion of the Middle Class," CEPR Discussion Papers 1298, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
Other versions:
- Saint-Paul, G., 1995. "Labour Market Institutions and the Cohesion of the Middle Class," DELTA Working Papers 95-30, DELTA (Ecole normale supérieure).
- Gilles Saint-Paul, 1996. "Labor market institutions and the cohesion of the middle class," International Tax and Public Finance, Springer, vol. 3(3), pages 385-395, July. [Downloadable!] (restricted)
Kevin Murphy & Mark Plant & Finis Welch, 1984. "Cohort Size and Earnings," UCLA Economics Working Papers 352, UCLA Department of Economics. [Downloadable!]
Saint-Paul, G., 1993. "On the Political Economy of Labor Market Flexibility," DELTA Working Papers 93-02, DELTA (Ecole normale supérieure).
Other versions:
- Saint-Paul, Gilles, 1993. "On the Political Economy of Labour Market Flexibility," CEPR Discussion Papers 803, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
- Gilles Saint-Paul, 1993. "On the Political Economy of Labor Market Flexibility," NBER Chapters, in: NBER Macroeconomics Annual 1993, Volume 8, pages 151-196 National Bureau of Economic Research, Inc. [Downloadable!]
Dale T. Mortensen, 1979. "The Matching Process as a Non-Cooperative/Bargaining Game," Discussion Papers 384, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
Kim B. Clark & Lawrence H. Summers, 1984. "Labor Force Participation: Timing and Persistence," NBER Working Papers 0977, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Other versions:
- Clark, Kim B & Summers, Lawrence H, 1982. "Labour Force Participation: Timing and Persistence," Review of Economic Studies, Blackwell Publishing, vol. 49(5), pages 825-44, Special I. [Downloadable!] (restricted)
Yoram Ben-Porath, 1967. "The Production of Human Capital and the Life Cycle of Earnings," Journal of Political Economy, University of Chicago Press, vol. 75, pages 352. [Downloadable!] (restricted)
Burdett, Kenneth, et al, 1984. "Earnings, Unemployment, and the Allocation of Time over Time," Review of Economic Studies, Blackwell Publishing, vol. 51(4), pages 559-78, October. [Downloadable!] (restricted)
Juhn, Chinhui & Murphy, Kevin M & Pierce, Brooks, 1993. "Wage Inequality and the Rise in Returns to Skill," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 410-42, June. [Downloadable!] (restricted)
Steven J. Davis, 1992. "Cross-Country Patterns of Change in Relative Wages," NBER Working Papers 4085, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Other versions:
- Steven J. Davis, 1992. "Cross-Country Patterns of Change in Relative Wages," NBER Chapters, in: NBER Macroeconomics Annual 1992, Volume 7, pages 239-300 National Bureau of Economic Research, Inc. [Downloadable!]
Pissarides, Christopher A, 1994. "Search Unemployment with On-the-Job Search," Review of Economic Studies, Blackwell Publishing, vol. 61(3), pages 457-75, July. [Downloadable!] (restricted)
Other versions:
- Christopher A. Pissarides, 1992. "Search Unemployment with on-the-job Search," CEP Discussion Papers dp0074, Centre for Economic Performance, LSE.

Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

Olivier Charlot, 2005. "Éducation, emploi et participation au marché du travail dans un modèle d'appariement," Recherches économiques de Louvain, De Boeck Université, vol. 71(1), pages 35-66. [Downloadable!]
Etienne WASMER, 2004. "Labor supply dynamics, unemployment and experience in the labor market," Discussion Papers (REL - Recherches Economiques de Louvain) 2004044, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES). [Downloadable!]
Other versions:
- Étienne Wasmer, 2004. "Labor supply dynamics, unemployment and experience in the labor market," Recherches économiques de Louvain, De Boeck Université, vol. 70(4), pages 461-482. [Downloadable!]
Wasmer, Etienne, 2002. "Labor Supply Dynamics, Unemployment and Human Capital Investments," IZA Discussion Papers 463, Institute for the Study of Labor (IZA). [Downloadable!]
Other versions:
- E Wasmer, 1998. "Labor Supply Dynamics, Unemployment and Human Capital Investments," CEP Discussion Papers dp0411, Centre for Economic Performance, LSE.
- Wasmer, Etienne, 1998. "Labour Supply Dynamics, Unemployment and Human Capital Investments," Seminar Papers 651, Stockholm University, Institute for International Economic Studies. [Downloadable!]
- Wasmer, E., 1998. "Labour Supply Dynamics, Unemployment and Human Capital Investments," Papers 651, Stockholm - International Economic Studies.
Olivier CHARLOT, 2005. "Education, emploi et participation au marchŽ du travail dans un modle dÕappariement," Discussion Papers (REL - Recherches Economiques de Louvain) 2005012, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES). [Downloadable!]

Statistics

Access and download statistics

Did you know? Data contributors to RePEc receive monthly emails with details about downloads and abstract views of their works.

This page was last updated on 2010-3-15.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.