IDEAS home Printed from https://ideas.repec.org/a/red/issued/v5y2002i3p704-717.html

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
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1006/redy.2002.0176
    File Function: Full text
    Download Restriction: Access to full texts is restricted to ScienceDirect subscribers and ScienceDirect institutional members. See http://www.sciencedirect.com/ for details.
    File URL: https://libkey.io/10.1006/redy.2002.0176?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Randall Gouge & Ian King, 1997. "A Competitive Theory of Employment Dynamics," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 64(1), pages 1-122.
    2. Backus, David K & Kehoe, Patrick J, 1992. "International Evidence of the Historical Properties of Business Cycles," American Economic Review, American Economic Association, vol. 82(4), pages 864-888, September.
    3. Norm Park & Bob Power & W. Craig Riddell & Ging Wong, 1996. "An Assessment of the Impact of Government-Sponsored Training," Canadian Journal of Economics, Canadian Economics Association, vol. 29(s1), pages 93-98, April.
    4. Neal, Derek, 1995. "Industry-Specific Human Capital: Evidence from Displaced Workers," Journal of Labor Economics, University of Chicago Press, vol. 13(4), pages 653-677, October.
    5. Kevin M. Murphy & Robert H. Topel, 1987. "The Evolution of Unemployment in the United States: 1968–1985," NBER Chapters, in: NBER Macroeconomics Annual 1987, Volume 2, pages 11-68, National Bureau of Economic Research, Inc.
    6. Steven J. Davis & John Haltiwanger, 1990. "Gross Job Creation and Destruction: Microeconomic Evidence and Macroeconomic Implications," NBER Chapters, in: NBER Macroeconomics Annual 1990, Volume 5, pages 123-186, National Bureau of Economic Research, Inc.
    7. Julian R. Betts & Laurel L. McFarland, 1995. "Safe Port in a Storm: The Impact of Labor Market Conditions on Community College Enrollments," Journal of Human Resources, University of Wisconsin Press, vol. 30(4), pages 741-765.
    8. Gadi Barlevy, 2002. "The Sullying Effect of Recessions," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 69(1), pages 65-96.
    9. Audrey Light, 1995. "The Effects of Interrupted Schooling on Wages," Journal of Human Resources, University of Wisconsin Press, vol. 30(3), pages 472-502.
    10. 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.
    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.
    12. Whitney Newey & Kenneth West, 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.
    13. 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.
    14. Robert M. Hauser, 1993. "Trends in College Entry among Whites, Blacks, and Hispanics," NBER Chapters, in: Studies of Supply and Demand in Higher Education, pages 61-120, National Bureau of Economic Research, Inc.
    15. 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.
    16. Lucas, Robert Jr. & Prescott, Edward C., 1974. "Equilibrium search and unemployment," Journal of Economic Theory, Elsevier, vol. 7(2), pages 188-209, February.
    17. Olivier Jean Blanchard & Finn E. Kydland, 1989. "Macroeconomic implications," Proceedings, Federal Reserve Bank of Cleveland, pages 201-213.
    18. Light, Audrey, 1995. "Hazard model estimates of the decision to reenroll in school," Labour Economics, Elsevier, vol. 2(4), pages 381-406, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Brunello, Giorgio, 2009. "The Effect of Economic Downturns on Apprenticeships and Initial Workplace Training: A Review of the Evidence," IZA Discussion Papers 4326, IZA Network @ LISER.
    2. 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.
    3. 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.
    4. 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.
    5. Sara Ayllón & Natalia Nollenberger, 2021. "The Unequal Opportunity For Skills Acquisition During The Great Recession In Europe," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 67(2), pages 289-316, June.
    6. Cathy Ning & Stephen Sapp, 2009. "Segmentation across International Equity, Bond, and Foreign Exchange Markets," Working Papers 010, Toronto Metropolitan University, Department of Economics.
    7. 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.
    8. Gadi Barlevy, 2004. "On the Timing of Innovation in Stochastic Schumpeterian Growth Models," NBER Working Papers 10741, National Bureau of Economic Research, Inc.
    9. 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.
    10. Marina Albanese & Francesco Busato & Gianluigi Cisco, 2022. "The role of higher education institutions in sustainable development: a DSGE analysis," RIEDS - Rivista Italiana di Economia, Demografia e Statistica - The Italian Journal of Economic, Demographic and Statistical Studies, SIEDS Societa' Italiana di Economia Demografia e Statistica, vol. 76(1), pages 119-130, January-M.
    11. Sadaba, Barbara & Vujić, Sunčica & Maier, Sofia, 2024. "Characterizing the schooling cycle," Economic Modelling, Elsevier, vol. 132(C).
    12. Fabian Goessling, 2018. "Human Capital, Growth, and Asset Prices," CQE Working Papers 6918, Center for Quantitative Economics (CQE), University of Muenster.
    13. Diana Alessandrini, 2014. "On the Cyclicality of Schooling Decisions: Evidence from Canadian Data," Working Paper series 16_14, Rimini Centre for Economic Analysis.
    14. Jennifer Graves & Zoë Kuehn, 2022. "Higher education decisions and macroeconomic conditions at age eighteen," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 13(1), pages 171-241, May.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bauer Anja & Keveloh Kristin & Mamertino Mariano & Weber Enzo, 2023. "Competing for Jobs: How COVID-19 Changes Search Behaviour in the Labour Market," German Economic Review, De Gruyter, vol. 24(4), pages 323-347, December.
    2. Yang, Guanyi, 2018. "Endogenous Skills and Labor Income Inequality," MPRA Paper 89638, University Library of Munich, Germany.
    3. Fraser Summerfield & Ioannis Theodossiou, 2017. "The Effects Of Macroeconomic Conditions At Graduation On Overeducation," Economic Inquiry, Western Economic Association International, vol. 55(3), pages 1370-1387, July.
    4. Carlos Carrillo‐Tudela & Ludo Visschers, 2023. "Unemployment and Endogenous Reallocation Over the Business Cycle," Econometrica, Econometric Society, vol. 91(3), pages 1119-1153, May.
    5. Herz, Benedikt, 2017. "Specific Human Capital and Wait Unemployment," MPRA Paper 76777, University Library of Munich, Germany.
    6. Scott Schuh & Robert K Triest, 1998. "Job Reallocation And The Business Cycle: New Facts An Old Debate," Working Papers 98-11, Center for Economic Studies, U.S. Census Bureau.
    7. Gadi Barlevy, 2004. "On the Timing of Innovation in Stochastic Schumpeterian Growth Models," NBER Working Papers 10741, National Bureau of Economic Research, Inc.
    8. Gomes, Joao & Greenwood, Jeremy & Rebelo, Sergio, 2001. "Equilibrium unemployment," Journal of Monetary Economics, Elsevier, vol. 48(1), pages 109-152, August.
    9. repec:eee:labchp:v:3:y:1999:i:pb:p:2711-2805 is not listed on IDEAS
    10. Maximiliano Dvorkin, 2013. "Sectoral Shocks, Reallocation and Unemployment in a Model of Competitive Labor Markets," 2013 Meeting Papers 1229, Society for Economic Dynamics.
    11. Robert Shimer, 2005. "The cyclicality of hires, separations, and job-to-job transitions," Review, Federal Reserve Bank of St. Louis, vol. 87(Jul), pages 493-508.
    12. John Haltiwanger & Scott Schuh, 1999. "Gross job flows between plants and industries," New England Economic Review, Federal Reserve Bank of Boston, issue Mar, pages 41-64.
    13. Esther Eiling & Raymond Kan & Ali Sharifkhani, 2018. "Sectoral Labor Reallocation and Return Predictability," Working Papers 2018-006, Human Capital and Economic Opportunity Working Group.
    14. Cristina Fernández & Roberta García & Paloma Lopez-Garcia & Benedicta Marzinotto & Roberta Serafini & Juuso Vanhala & Ladislav Wintr, 2017. "Firm growth in Europe: An overview based on the COMPNET labour module," BCL working papers 107, Central Bank of Luxembourg.
    15. Isaac Baley & Lars Ljunqvist & Thomas Sargent, 2023. "Cross-Phenomenon Restrictions: Unemployment Effects of Layoff Costs and Quit Turbulence," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 50, pages 43-60, October.
    16. Alena Bicakova & Guido Matias Cortes & Kelly Foley & Jacopo Mazza & Peter McHenry, 2025. "Unpacking the Countercyclicality of Post-Secondary Enrollment in the United States," CERGE-EI Working Papers wp795, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    17. Giovanni Gallipoli & Gianluigi Pelloni, 2013. "Macroeconomic Effects of Job Reallocations: A Survey," Review of Economic Analysis, Digital Initiatives at the University of Waterloo Library, vol. 5(2), pages 127-176, December.
    18. Stenberg, Anders & Westerlund, Olle, 2016. "Flexibility at a cost – Should governments stimulate tertiary education for adults?," The Journal of the Economics of Ageing, Elsevier, vol. 7(C), pages 69-86.
    19. Jerome Adda & Christian Dustmann & Costas Meghir & Jean-Marc Robin, 2013. "Career progression, economic downturns, and skills," IFS Working Papers W13/24, Institute for Fiscal Studies.
    20. Jing Dang & Max Gillman & Michal Kejak, 2011. "Real Business Cycles with a Human Capital Investment Sector and Endogenous Growth: Persistence, Volatility and Labor Puzzles," KRTK-KTI WORKING PAPERS 1128, Institute of Economics, Centre for Economic and Regional Studies.
    21. Dennis A. Ahlburg & Brian P. Mccall & In-gang Na, "undated". "Time to Dropout From College: A Hazard Model with Endogenous Waiting," Working Papers 0102, Human Resources and Labor Studies, University of Minnesota (Twin Cities Campus).

    More about this item

    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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:red:issued:v:5:y:2002:i:3:p:704-717. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Christian Zimmermann (email available below). General contact details of provider: https://edirc.repec.org/data/sedddea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.