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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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    5. Gadi Barlevy, 2002. "The Sullying Effect of Recessions," Review of Economic Studies, Oxford University Press, vol. 69(1), pages 65-96.
    6. Audrey Light, 1995. "The Effects of Interrupted Schooling on Wages," Journal of Human Resources, University of Wisconsin Press, vol. 30(3), pages 472-502.
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    8. Newey, Whitney & West, Kenneth, 2014. "A simple, positive semi-definite, heteroscedasticity and autocorrelation consistent covariance matrix," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 33(1), pages 125-132.
    9. Prescott, Edward C, 1975. "Efficiency of the Natural Rate," Journal of Political Economy, University of Chicago Press, vol. 83(6), pages 1229-1236, December.
    10. Mortensen, Dale T., 1994. "The cyclical behavior of job and worker flows," Journal of Economic Dynamics and Control, Elsevier, vol. 18(6), pages 1121-1142, November.
    11. Stephen V. Cameron & James J. Heckman, 2001. "The Dynamics of Educational Attainment for Black, Hispanic, and White Males," Journal of Political Economy, University of Chicago Press, vol. 109(3), pages 455-499, June.
    12. 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. 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.
    2. Fabio MĂ©ndez & Facundo SepĂșlveda, 2012. "The Cyclicality of Skill Acquisition: Evidence from Panel Data," American Economic Journal: Macroeconomics, American Economic Association, vol. 4(3), pages 128-152, July.
    3. 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.
    4. Fabian Goessling, 2018. "Human Capital, Growth, and Asset Prices," CQE Working Papers 6918, Center for Quantitative Economics (CQE), University of Muenster.
    5. Cathy Ning & Stephen Sapp, 2009. "Segmentation across International Equity, Bond, and Foreign Exchange Markets," Working Papers 010, Ryerson University, Department of Economics.
    6. 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.
    7. Diana Alessandrini, 2014. "On the Cyclicality of Schooling Decisions: Evidence from Canadian Data," Working Paper series 16_14, Rimini Centre for Economic Analysis.
    8. Gadi Barlevy, 2004. "On the timing of innovation in stochastic Schumpeterian growth models," Working Paper Series WP-04-11, Federal Reserve Bank of Chicago.

    More about this item

    Keywords

    business cycles; schooling; equilibrium search;

    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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