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A Dynamic Model of Occupational Mobility, Structural Unemployment, Average Labour Productivity and Wage Dispersion

  • Fabrice Collard

    (The University of Bern)

  • Jacob Wong

    (The University of Adelaide)

This paper presents a dynamic model of structural unemployment and occupational choice in which an economy is subjected to aggregate reallocation shocks and workers may choose to incur costs to retrain in order to move into occupations that pay higher wages. As it is costly for workers to retrain, workers may prefer to remain unemployed in occupations suffering through relatively low productivity states. Reallocation shocks, which change the relative labour productivity across occupations, drive variation in the distribution of workers across occupations. The general equilibrium model produces volatile unemployment and occupational mobility rates but also features (i) sign switches in the correlation between average labour productivity and unemployment rates across decades within sample runs, (ii) decades with negatively correlated unemployment and occupational mobility rates, and (iii) substantially large swings in the rate of occupational mobility that are strongly, positively correlated with measures of wage inequality.

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File URL: https://www.economicdynamics.org/meetpapers/2011/paper_821.pdf
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Paper provided by Society for Economic Dynamics in its series 2011 Meeting Papers with number 821.

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Date of creation: 2011
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Handle: RePEc:red:sed011:821
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  1. Jordi Galí & Thijs van Rens, 2010. "The Vanishing Procyclicality of Labor Productivity," Kiel Working Papers 1641, Kiel Institute for the World Economy.
  2. Gouge, Randall & King, Ian, 1997. "A Competitive Theory of Employment Dynamics," Review of Economic Studies, Wiley Blackwell, vol. 64(1), pages 1-22, January.
  3. Christina Gathmann & Uta Schönberg, 2010. "How General Is Human Capital? A Task-Based Approach," Journal of Labor Economics, University of Chicago Press, vol. 28(1), pages 1-49, 01.
  4. Moscarini, Giuseppe & Thomsson, Kaj, 2006. "Occupational and Job Mobility in the US," Working Papers 19, Yale University, Department of Economics.
  5. Barnichon, Regis, 2010. "Productivity and unemployment over the business cycle," Journal of Monetary Economics, Elsevier, vol. 57(8), pages 1013-1025, November.
  6. Young, Eric R., 2010. "Solving the incomplete markets model with aggregate uncertainty using the Krusell-Smith algorithm and non-stochastic simulations," Journal of Economic Dynamics and Control, Elsevier, vol. 34(1), pages 36-41, January.
  7. Maxim Poletaev & Chris Robinson, 2008. "Human Capital Specificity: Evidence from the Dictionary of Occupational Titles and Displaced Worker Surveys, 1984-2000," Journal of Labor Economics, University of Chicago Press, vol. 26(3), pages 387-420, 07.
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