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Low-Skilled Unemployment, Biased Technological Shocks and Job Competition

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  • Pierrard, Olivier

    ()
    (Central Bank of Luxembourg)

  • Sneessens, Henri R.

    ()
    (University of Luxembourg)

Abstract

The unemployment rise in EU countries has been particularly strong for low-skilled workers. This observation has often been explained in terms of biased technical change and relative wage rigidities. More attention has been paid recently to an alternative mechanism, the crowding-out of low-skilled workers by over-qualified workers. The objective of this paper is both methodological and empirical. We construct a dynamic general equilibrium model with two types of jobs and two types of workers and with search unemployment. The model is calibrated and simulated to examine the interactions between the “skill bias” and “crowdingout” mechanisms. When such interactions are accounted for, the model reproduces quite well the observed unemployment changes.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 784.

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Length: 32 pages
Date of creation: May 2003
Date of revision:
Handle: RePEc:iza:izadps:dp784

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Keywords: skill bias; crowding out; over-education; equilibrium search unemployment; ladder effect;

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  7. Berman, Eli & Bound, John & Machin, Stephen, 1997. "Implications of Skill-Biased Technological Change: International Evidence," Working Paper Series, Research Institute of Industrial Economics 486, Research Institute of Industrial Economics.
  8. Hartog, Joop, 2000. "Over-education and earnings: where are we, where should we go?," Economics of Education Review, Elsevier, Elsevier, vol. 19(2), pages 131-147, April.
  9. Berg, Gerard J. van den & Gautier, Pieter A. & Ours, Jan C., 1998. "Worker turnover at the firm level and crowding out of lower educated workers," Serie Research Memoranda, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics 0049, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
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  12. 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), Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) 2002020, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
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  14. Dolado, Juan J. & Felgueroso, Florentino & Jimeno, Juan F., 2000. "Youth labour markets in Spain: Education, training, and crowding-out," European Economic Review, Elsevier, Elsevier, vol. 44(4-6), pages 943-956, May.
  15. Mortensen, Dale T & Pissarides, Christopher A, 1999. "Unemployment Responses to 'Skill-Biased' Technology Shocks: The Role of Labour Market Policy," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 109(455), pages 242-65, April.
  16. Merz, Monika, 1995. "Search in the labor market and the real business cycle," Journal of Monetary Economics, Elsevier, Elsevier, vol. 36(2), pages 269-300, November.
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  18. Manacorda, Marco & Petrongolo, Barbara, 1999. "Skill Mismatch and Unemployment in OECD Countries," Economica, London School of Economics and Political Science, London School of Economics and Political Science, vol. 66(262), pages 181-207, May.
  19. Pieter A. Gautier, 1999. "Unemployment and Search Externalities in a Model with Heterogeneous Jobs and Heterogeneous Workers," Tinbergen Institute Discussion Papers 99-075/3, Tinbergen Institute.
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