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Unemployment and Endogenous Growth with Capital-Skill Complementarity


    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES) and DELTA, Paris)

We construct an endogenous growth intertemporal general equilibrium model with two types of jobs and two types of workers. We allow for job competition between high- and low skilled workers on the low-skilled segment of the labor market and for on-the-job search for high skilled workers. Matching processes are represented by matching functions à la Pissarides. Workers search intensities are endogenous. We distinguish between embodied and disembodied technological progress and endogenize them through a learning by doing process based on capital accumulation. Social returns to capital are imposed to be constant. Biased technological change is introduced via embodied technical progress and new technologies-skill complementarity relationship. The model reproduces quite well the producivity slowdown puzzle, the unemployment rate evolutions and the relative wage stability observed over the last decades. It suggests strong interactions between embodied technological progress, biased technological change, discouragement effects on job competition.

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Paper provided by Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) in its series Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) with number 2004001.

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Length: 44
Date of creation: 01 Feb 2004
Date of revision:
Handle: RePEc:ctl:louvir:2004001
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  1. Cockx, Bart & Dejemeppe, Muriel, 2002. "Do the Higher Educated Unemployed Crowd Out the Lower Educated Ones in a Competition for Jobs?," IZA Discussion Papers 541, Institute for the Study of Labor (IZA).
  2. Timothy F. Bresnahan & Erik Brynjolfsson & Lorin M. Hitt, 2002. "Information Technology, Workplace Organization, and the Demand for Skilled Labor: Firm-Level Evidence," The Quarterly Journal of Economics, Oxford University Press, vol. 117(1), pages 339-376.
  3. Per Krusell & Lee E. Ohanian & Jose-Victor Rios-Rull & Giovanni L. Violante, 1997. "Capital-skill complementarity and inequality: a macroeconomic analysis," Staff Report 239, Federal Reserve Bank of Minneapolis.
  4. Stephen Machin & John Van Reenen, 1998. "Technology and Changes in Skill Structure: Evidence from Seven OECD Countries," The Quarterly Journal of Economics, Oxford University Press, vol. 113(4), pages 1215-1244.
  5. R.A. Brecher & Z. Chen & E.U. Choudhri, 2000. "Unemployment and Growth in the Long Run: An Efficiency-Wage Model with Optimal Savings," Carleton Economic Papers 00-01, Carleton University, Department of Economics, revised Sep 2002.
  6. Fabrice Collard & Raquel Fonseca & Rafael Munoz, 2002. "Spanish Unemployment Persistence and the Ladder Effect," CEP Discussion Papers dp0538, Centre for Economic Performance, LSE.
  7. Philippe Aghion & Peter Howitt, 1994. "Growth and Unemployment," Review of Economic Studies, Oxford University Press, vol. 61(3), pages 477-494.
  8. Brauninger, Michael & Pannenberg, Markus, 2002. "Unemployment and productivity growth: an empirical analysis within an augmented Solow model," Economic Modelling, Elsevier, vol. 19(1), pages 105-120, January.
  9. Patacchini, Eleonora & Zenou, Yves, 2003. "Search Intensity, Cost of Living and Local Labor Markets in Britain," IZA Discussion Papers 772, Institute for the Study of Labor (IZA).
  10. FitzRoy, Felix & Funke, Michael, 1995. "Capital-Skill Complementarity in West German Manufacturing," Empirical Economics, Springer, vol. 20(4), pages 651-65.
  11. Dolado, Juan J. & Jansen, Marcel & Jimeno, Juan F, 2002. "A Matching Model of Crowding-Out and On-the-Job Search (with an Application to Spain)," CEPR Discussion Papers 3466, C.E.P.R. Discussion Papers.
  12. repec:tpr:qjecon:v:113:y:1998:i:4:p:1215-1244 is not listed on IDEAS
  13. James Albrecht & Susan Vroman, 2002. "A Matching Model with Endogenous Skill Requirements," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(1), pages 283-305, February.
  14. BOUCEKKINE, Raouf & DEL RIO, Fernando & LICANDRO, Omar, . "Embodied technological change, learning-by-doint and the productivity slowdown," CORE Discussion Papers RP 1629, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  15. Dolado, Juan J. & Felgueroso, Florentino & Jimeno, Juan F., 2000. "Youth labour markets in Spain: Education, training, and crowding-out," European Economic Review, Elsevier, vol. 44(4-6), pages 943-956, May.
  16. Olivier, Pierrard & Henri R., Sneessens, 2002. "Low-Skilled Unemployment, Biased Technological Shocks and Job Competition," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2003014, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES), revised 03 May 2002.
  17. Andolfatto, David, 1996. "Business Cycles and Labor-Market Search," American Economic Review, American Economic Association, vol. 86(1), pages 112-32, March.
  18. Stephen Machin & John Van Reenen, 1998. "Technology and changes in skill structure: evidence from seven OECD countries," IFS Working Papers W98/04, Institute for Fiscal Studies.
  19. Eli Berman & John Bound & Zvi Griliches, 1994. "Changes in the Demand for Skilled Labor within U. S. Manufacturing: Evidence from the Annual Survey of Manufactures," The Quarterly Journal of Economics, Oxford University Press, vol. 109(2), pages 367-397.
  20. Merz, Monika, 1995. "Search in the labor market and the real business cycle," Journal of Monetary Economics, Elsevier, vol. 36(2), pages 269-300, November.
  21. Postel-Vinay, Fabien, 1998. "Transitional dynamics of the search model with endogenous growth," Journal of Economic Dynamics and Control, Elsevier, vol. 22(7), pages 1091-1115, May.
  22. Greenwood, J. & Hercowitz, Z. & Krusell, P., 1996. "Long-Run Implications of Investment-Specific Technological Change," RCER Working Papers 420, University of Rochester - Center for Economic Research (RCER).
  23. Paul M Romer, 1999. "Increasing Returns and Long-Run Growth," Levine's Working Paper Archive 2232, David K. Levine.
  24. C Bean & Christopher A. Pissarides, 1992. "Unemployment, Consumption and Growth," CEP Discussion Papers dp0100, Centre for Economic Performance, LSE.
  25. Eva, MORENO GALBIS, 2002. "Changes in the skill structure of the labour force. An empirical application to the Spanish case," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2002035, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
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