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Innovations induce asymmetric employment movements

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  • Zwick, Thomas

Abstract

This paper provides a labour supply explanation to the observation that in Germany employment changes are asymmetric during the business cycle. Employment increases are slower, because the reservation wage of workers increases in times of job uncertainty. Workers are afraid in those periods of losing their sunk and necessary human capital investments. They weigh the risks and benefits of investing in human capital with their certain outside option when they decide about staying in the labour market. Human capital investments are sunk and necessary, because firms need new skills while older skills get obsolete at a constant rate. Skill obsolescence is induced by innovations. --

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Bibliographic Info

Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 99-24.

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Date of creation: 1999
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Handle: RePEc:zbw:zewdip:5240

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  1. 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.
  2. Daron Acemoglu & Jorn-Steffen Pischke, 1998. "Beyond Becker: Training in Imperfect Labor Markets," NBER Working Papers 6740, National Bureau of Economic Research, Inc.
  3. Ricardo J. Caballero & Mohamad L. Hammour, 1991. "The Cleansing Effect of Recessions," NBER Working Papers 3922, National Bureau of Economic Research, Inc.
  4. Burgess, Simon M, 1992. "Asymmetric Employment Cycles in Britain: Evidence and an Explanation," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 102(411), pages 279-90, March.
  5. Hargreaves Heap, S P, 1980. "Choosing the Wrong 'Natural' Rate: Accelerating Inflation or Decelerating Employment and Growth?," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 90(359), pages 611-20, September.
  6. Clark, Andrew E & Oswald, Andrew J, 1994. "Unhappiness and Unemployment," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 104(424), pages 648-59, May.
  7. David G. Blanchflower, 1990. "Fear, Unemployment and Pay Flexibility," NBER Working Papers 3365, National Bureau of Economic Research, Inc.
  8. William A. Darity & Arthur H. Goldsmith, 1996. "Social Psychology, Unemployment and Macroeconomics," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 10(1), pages 121-140, Winter.
  9. Lindbeck, Assar & Snower, Dennis J, 1986. "Wage Setting, Unemployment, and Insider-Outsider Relations," American Economic Review, American Economic Association, American Economic Association, vol. 76(2), pages 235-39, May.
  10. Franz, Wolfgang, 1990. "Hysteresis in Economic Relationships: An Overview," Empirical Economics, Springer, Springer, vol. 15(2), pages 109-25.
  11. Goldsmith, Arthur H. & Darity, William Jr., 1992. "Social psychology, unemployment exposure and equilibrium unemployment," Journal of Economic Psychology, Elsevier, Elsevier, vol. 13(3), pages 449-471, September.
  12. Pissarides, Christopher A, 1992. "Loss of Skill during Unemployment and the Persistence of Employment Shocks," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 107(4), pages 1371-91, November.
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