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The impact of TFP growth on the unemployment rate: does on-the-job training matter?

  • Moreno-Galbis, Eva

This paper seeks to gain insights into the relationship between growth and unemployment in a setting with heterogeneous skills, human capital accumulation, on-the-job training and capital-skill complementarity. We use an endogenous job destruction framework in the style of Mortensen and Pissarides (1998) with directed search. We show that, when growth accelerates, a larger share of unskilled workers seeks training, increasing firms’ incentives to update job-specific technology (rather than destroying it). By magnifying the impact of growth on employment, the introduction of human capital issues allows the model to more closely match the estimated sensitivity of unemployment with respect to growth. When calibrated, the model manages to reproduce the aggregate capitalization effect estimated using OECD data. We find that growth reduces unemployment for individuals receiving training, while it increases the unemployment rate of unskilled workers without training (creative destruction effect).

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Paper provided by CEPREMAP in its series CEPREMAP Working Papers (Docweb) with number 1207.

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Length: 41 pages
Date of creation: Sep 2012
Date of revision:
Handle: RePEc:cpm:docweb:1207
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  9. Langot, François & Moreno-Galbis, Eva, 2013. "Does the growth process discriminate against older workers?," Journal of Macroeconomics, Elsevier, vol. 38(PB), pages 286-306.
  10. Chari, V V & Hopenhayn, Hugo, 1991. "Vintage Human Capital, Growth, and the Diffusion of New Technology," Journal of Political Economy, University of Chicago Press, vol. 99(6), pages 1142-65, December.
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  12. Laing, Derek & Palivos, Theodore & Wang, Ping, 1995. "Learning, Matching and Growth," Review of Economic Studies, Wiley Blackwell, vol. 62(1), pages 115-29, January.
  13. Christopher A. Pissarides & Giovanna Vallanti, 2007. "The Impact Of Tfp Growth On Steady-State Unemployment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 48(2), pages 607-640, 05.
  14. Maarten Goos & Alan Manning, 2003. "Lousy and Lovely Jobs: the Rising Polarization of Work in Britain," CEP Discussion Papers dp0604, Centre for Economic Performance, LSE.
  15. Gómez-Salvador, Ramón & Messina, Julián & Vallanti, Giovanna, 2004. "Gross job flows and institutions in Europe," Working Paper Series 0318, European Central Bank.
  16. Thomas Lemieux, 2006. "Increasing Residual Wage Inequality: Composition Effects, Noisy Data, or Rising Demand for Skill?," American Economic Review, American Economic Association, vol. 96(3), pages 461-498, June.
  17. Dale T. Mortensen & Christopher A. Pissarides, 1998. "Technological Progress, Job Creation and Job Destruction," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(4), pages 733-753, October.
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  21. David H. Autor & Frank Levy & Richard J. Murnane, 2003. "The Skill Content Of Recent Technological Change: An Empirical Exploration," The Quarterly Journal of Economics, MIT Press, vol. 118(4), pages 1279-1333, November.
  22. Acemoglu, Daron & Pischke, Jörn-Steffen, 1996. "Why do Firms Train? Theory and Evidence," CEPR Discussion Papers 1460, C.E.P.R. Discussion Papers.
  23. Eli Berman & John Bound & Zvi Griliches, 1993. "Changes in the Demand for Skilled Labor within U.S. Manufacturing Industries: Evidence from the Annual Survey of Manufacturing," NBER Working Papers 4255, National Bureau of Economic Research, Inc.
  24. Alexandra Spitz-Oener, 2006. "Technical Change, Job Tasks, and Rising Educational Demands: Looking outside the Wage Structure," Journal of Labor Economics, University of Chicago Press, vol. 24(2), pages 235-270, April.
  25. Per Krusell & Lee E. Ohanian & JosÈ-Victor RÌos-Rull & Giovanni L. Violante, 2000. "Capital-Skill Complementarity and Inequality: A Macroeconomic Analysis," Econometrica, Econometric Society, vol. 68(5), pages 1029-1054, September.
  26. Lars Ljungqvist & Thomas J. Sargent, 2008. "Two Questions about European Unemployment," Econometrica, Econometric Society, vol. 76(1), pages 1-29, 01.
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  28. Parente Stephen L., 1994. "Technology Adoption, Learning-by-Doing, and Economic Growth," Journal of Economic Theory, Elsevier, vol. 63(2), pages 346-369, August.
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