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Biased Technological Shocks, Wage Rigidities and Low-Skilled Unemployment

Author Info

Listed author(s):
  • Olivier Pierrard
  • Henri Sneessens

Abstract

The contrast between the evolution over the last decades of the EU and the US unemployment rates, especially for the low-skilled, is well known. A consensus view is that these different outcomes can be explained by the interactions between common shocks and specific institutional setups. In this paper, we emphasise the interactions between technological changes and wages ridigities. We construct a fully calibrated general equilibrium model with two types of jobs and two types of workers, and with search unemployment. Our simulations show that with wages rigidities, technological changes suffice to generate a continuous rise in the low-skilled unemployment rate and an almost unchanged high-skilled unemployment rate. Without wage rigidities, the unemployment rates remain unchanged but the wage dispersion widens.

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Paper provided by Netherlands Central Bank, Research Department in its series DNB Working Papers with number 020.

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Date of creation: Dec 2004
Handle: RePEc:dnb:dnbwpp:020
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Keywords: unemployent; skill biased changes; wage rigidities;

Find related papers by JEL classification:

  • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
  • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
  • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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  7. Eli Bekman & John Bound & Stephen Machin, 1998. "Implications of Skill-Biased Technological Change: International Evidence," The Quarterly Journal of Economics, Oxford University Press, vol. 113(4), pages 1245-1279.
  8. Stephen Nickell, 1997. "Unemployment and Labor Market Rigidities: Europe versus North America," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 55-74, Summer.
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  10. Manacorda, Marco & Petrongolo, Barbara, 1999. "Skill Mismatch and Unemployment in OECD Countries," Economica, London School of Economics and Political Science, vol. 66(262), pages 181-207, May.
  11. 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.
  12. 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.
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  14. Blázquez Cuesta, Maite & Jansen, Marcel, 2003. "Efficiency in a Matching Model with Heterogeneous Agents: Too Many Good or Bad Jobs?," IZA Discussion Papers 968, Institute for the Study of Labor (IZA).
  15. David H. Autor & Lawrence F. Katz & Alan B. Krueger, 1998. "Computing Inequality: Have Computers Changed the Labor Market?," The Quarterly Journal of Economics, Oxford University Press, vol. 113(4), pages 1169-1213.
  16. Andolfatto, David, 1996. "Business Cycles and Labor-Market Search," American Economic Review, American Economic Association, vol. 86(1), pages 112-132, March.
  17. 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).
  18. Arthur J. Hosios, 1990. "On The Efficiency of Matching and Related Models of Search and Unemployment," Review of Economic Studies, Oxford University Press, vol. 57(2), pages 279-298.
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