Guido Cazzavillan () (Department of Economics, University Of Venice Cà Foscari) Krzysztof Olszewski () (Department of Economics, University Of Venice Cà Foscari)
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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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Paper provided by University of Venice "Ca' Foscari", Department of Economics in its series Working Papers with number
2009_12.