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Procyclical Skill Retooling and Equilibrium Search

  • Ian King

    (University of Auckland)

  • Arthur Sweetman

    (Queen's University)

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)

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File URL: http://dx.doi.org/10.1006/redy.2002.0176
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Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 5 (2002)
Issue (Month): 3 (July)
Pages: 704-717

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Handle: RePEc:red:issued:v:5:y:2002:i:3:p:704-717
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  1. 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.
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  8. Oliver Jean Blanchard & Finn E. Kydland, 1989. "Macroeconomic implications," Proceedings, Federal Reserve Bank of Cleveland, pages 201-213.
  9. Prescott, Edward C, 1975. "Efficiency of the Natural Rate," Journal of Political Economy, University of Chicago Press, vol. 83(6), pages 1229-36, December.
  10. 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.
  11. Audrey Light, 1995. "The Effects of Interrupted Schooling on Wages," Journal of Human Resources, University of Wisconsin Press, vol. 30(3), pages 472-502.
  12. 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.
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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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