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Low-Skilled Unemployment, Biased Technological Shocks and Job Competition

Author

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  • Pierrard, Olivier

    () (Central Bank of Luxembourg)

  • Sneessens, Henri R.

    () (Catholic University Louvain)

Abstract

The unemployment rise in EU countries has been particularly strong for low-skilled workers. This observation has often been explained in terms of biased technical change and relative wage rigidities. More attention has been paid recently to an alternative mechanism, the crowding-out of low-skilled workers by over-qualified workers. The objective of this paper is both methodological and empirical. We construct a dynamic general equilibrium model with two types of jobs and two types of workers and with search unemployment. The model is calibrated and simulated to examine the interactions between the “skill bias” and “crowdingout” mechanisms. When such interactions are accounted for, the model reproduces quite well the observed unemployment changes.

Suggested Citation

  • Pierrard, Olivier & Sneessens, Henri R., 2003. "Low-Skilled Unemployment, Biased Technological Shocks and Job Competition," IZA Discussion Papers 784, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp784
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Joseph, G. & Pierrard, O. & Sneessens, H. R., 2004. "Job turnover, unemployment and labor market institutions," Labour Economics, Elsevier, vol. 11(4), pages 451-468, August.
    2. Joan Muysken & Ehsan Vallizadeh & Thomas Ziesemer, 2015. "Migration, Unemployment, and Skill Downgrading," Scandinavian Journal of Economics, Wiley Blackwell, vol. 117(2), pages 403-451, April.
    3. Olivier Pierrard & Henri Sneessens, 2004. "The European Labour Markets - Aggregate Unemployment and Relative Wage Rigidities," CESifo Forum, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 5(1), pages 19-23, October.
    4. Pierrard, Olivier, 2008. "Commuters, residents and job competition," Regional Science and Urban Economics, Elsevier, vol. 38(6), pages 565-577, November.
    5. Belan, Pascal & Carré, Martine & Gregoir, Stéphane, 2010. "Subsidizing low-skilled jobs in a dual labor market," Labour Economics, Elsevier, vol. 17(5), pages 776-788, October.
    6. Muysken, Joan & Vallizadeh, Ehsan & Ziesemer, Thomas, 2012. "The impact of Medium-Skilled immigration: A general equilibrium approach," MERIT Working Papers 2012-055, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    7. O'Mahony, Mary & Robinson, Catherine & Vecchi, Michela, 2008. "The impact of ICT on the demand for skilled labour: A cross-country comparison," Labour Economics, Elsevier, vol. 15(6), pages 1435-1450, December.
    8. E. Moreno-Galbis & Henri Sneessens, 2007. "Low-skilled unemployment, capital-skill complementarity and embodied technical progress," Recherches économiques de Louvain, De Boeck Université, vol. 73(3), pages 241-272.
    9. Olivier Pierrard & Henri R. Sneessens, 2009. "LOLA 1.0: Luxembourg overLapping generation model for policy analysis," BCL working papers 36, Central Bank of Luxembourg.
    10. Olivier Pierrard, 2007. "Commuters, residents and job competition in Luxembourg," BCL working papers 26, Central Bank of Luxembourg.
    11. Runli Xie, 2008. "Skill Specific Unemployment with Imperfect Substitution of Skills," SFB 649 Discussion Papers SFB649DP2008-024, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
    12. Eva, MORENO-GALBIS, 2004. "Unemployment and Endogenous Growth with Capital-Skill Complementarity," LIDAM Discussion Papers IRES 2004001, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).

    More about this item

    Keywords

    skill bias; crowding out; over-education; equilibrium search unemployment; ladder effect;

    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
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand

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