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Procyclical Skill Retooling and Equilibrium Search

Author

Listed:
  • Ian King

    (University of Auckland)

  • Arthur Sweetman

    (Queen's University)

Abstract

We argue that more workers choose to switch occupations in booms than in recessions. That is, skill retooling is procyclical. This view is consistent with Lucas and Prescotts (1974) equilibrium search model modified with aggregate shocks and unemployment insurance. Empirical support is found in a unique Canadian administrative data set that measures the annual flow of workers (from 1979-1993) who separate from their jobs to 'return to school'. This flow is strongly procyclical. (Copyright: Elsevier)

Suggested Citation

  • Ian King & Arthur Sweetman, 2002. "Procyclical Skill Retooling and Equilibrium Search," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(3), pages 704-717, July.
  • Handle: RePEc:red:issued:v:5:y:2002:i:3:p:704-717
    DOI: 10.1006/redy.2002.0176
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    References listed on IDEAS

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    9. David N. DeJong & Beth F. Ingram, 2001. "The Cyclical Behavior of Skill Acquisition," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 4(3), pages 536-561, July.
    10. Newey, Whitney & West, Kenneth, 2014. "A simple, positive semi-definite, heteroscedasticity and autocorrelation consistent covariance matrix," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 33(1), pages 125-132.
    11. Prescott, Edward C, 1975. "Efficiency of the Natural Rate," Journal of Political Economy, University of Chicago Press, vol. 83(6), pages 1229-1236, December.
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    15. Lucas, Robert Jr. & Prescott, Edward C., 1974. "Equilibrium search and unemployment," Journal of Economic Theory, Elsevier, vol. 7(2), pages 188-209, February.
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    Citations

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    Cited by:

    1. Fabio Méndez & Facundo Sepúlveda, 2012. "The Cyclicality of Skill Acquisition: Evidence from Panel Data," American Economic Journal: Macroeconomics, American Economic Association, vol. 4(3), pages 128-152, July.
    2. Alessandrini, Diana, 2018. "Is post-secondary education a safe port and for whom? Evidence from Canadian data," Economics of Education Review, Elsevier, vol. 67(C), pages 1-13.
    3. Caponi Vincenzo & Kayahan Burc & Plesca Miana, 2010. "The Impact of Aggregate and Sectoral Fluctuations on Training Decisions," The B.E. Journal of Macroeconomics, De Gruyter, vol. 10(1), pages 1-37, October.
    4. Cathy Ning & Stephen Sapp, 2009. "Segmentation across International Equity, Bond, and Foreign Exchange Markets," Working Papers 010, Ryerson University, Department of Economics.
    5. Summerfield, Fraser, 2014. "Labor Market Conditions, Skill Requirements and Education Mismatch," CLSSRN working papers clsrn_admin-2014-19, Vancouver School of Economics, revised 28 Apr 2014.
    6. Gadi Barlevy, 2004. "On the Timing of Innovation in Stochastic Schumpeterian Growth Models," NBER Working Papers 10741, National Bureau of Economic Research, Inc.
    7. Ferrer, Ana M. & Menendez, Alicia, 2009. "The Returns to Flexible Postsecondary Education: The Effect of Delaying School," CLSSRN working papers clsrn_admin-2009-26, Vancouver School of Economics, revised 15 Mar 2009.
    8. Fabian Goessling, 2018. "Human Capital, Growth, and Asset Prices," CQE Working Papers 6918, Center for Quantitative Economics (CQE), University of Muenster.
    9. Diana Alessandrini, 2014. "On the Cyclicality of Schooling Decisions: Evidence from Canadian Data," Working Paper series 16_14, Rimini Centre for Economic Analysis.

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    More about this item

    Keywords

    business cycles; schooling; equilibrium search;
    All these keywords.

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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