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Skill-biased technological change and endogenous labor supply in EU Transition Economies and the US

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  • Guido Cazzavillan

    ()
    (Department of Economics, University Of Venice Cà Foscari)

  • Krzysztof Olszewski

    ()
    (Department of Economics, University Of Venice Cà Foscari)

Abstract

In this paper skill-biased technological change is linked with endogenous labor supply which allows for unemployment. This is a novel approach, as the literature on skill-biased technological change considers inelastic labor supply. Elastic labor supply allows us to explain how the observed increasing unemployment of unskilled workers is caused by skill-biased technological change. Our numerical analysis shows that if the skill-biased technological change is not followed by the growth of total factor productivity, then output, physical capital stock and consumption decline. Using empirical data on wages and education, we construct a time series for skill-biased technological change for Poland and the US. The empirical relevance of the model is tested by calibrating it to empirical data for Poland over the period 1996-2006 and US over the period 1992-2008. With only two necessary inputs, share of skilled workers in total population and the technology adopted by firms, this model allows to simulate the future behaviour of the labor market.

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Bibliographic Info

Paper provided by Department of Economics, University of Venice "Ca' Foscari" in its series Working Papers with number 2009_12.

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Length: 29
Date of creation: 2009
Date of revision:
Handle: RePEc:ven:wpaper:2009_12

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Keywords: Skill-biased technological change; Endogenous labor supply; Transition Economies;

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Cited by:
  1. Steven Lugauer, 2012. "The Supply of Skills in the Labor Force and Aggregate Output Volatility," Working Papers, University of Notre Dame, Department of Economics 005, University of Notre Dame, Department of Economics, revised Jun 2012.

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