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Unskilled workers in an economy with skill-biased technology

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Listed:
  • Shouyong Shi

Abstract

This paper contributes to the search theory of unemployment by endogenously generating matching functions for skilled and unskilled workers from a wage-posting game. The model is capable of producing a positive skill premium and a positive wage differential among homogenous unskilled workers. The skill premium arises from a skill-biased technology; the wage differential among unskilled workers sustains because a lower wage is compensated by a higher change of getting the job. The model provides useful explanations for the observed dynamics patterns of within-skill and between-skill wage differentials in the 1970s and 1980s and for the relative cyclical volatility of hours of worker by different skill groups of workers.

Suggested Citation

  • Shouyong Shi, 1999. "Unskilled workers in an economy with skill-biased technology," Working Paper Series WP-99-5, Federal Reserve Bank of Chicago.
    • Handle: RePEc:fip:fedhwp:wp-99-5
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    Cited by:

    1. is not listed on IDEAS
    2. Shouyong Shi, 2000. "The Research Agenda: Search Theory beyond the Matching Function," EconomicDynamics Newsletter, Review of Economic Dynamics, vol. 1(2), April.
    3. Ingram, Beth F. & Neumann, George R., 2006. "The returns to skill," Labour Economics, Elsevier, vol. 13(1), pages 35-59, February.

    More about this item

    Keywords

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    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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