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Overeducation, Job Competition and Unemployment

  • Muysken Joan
  • Weel Bas ter

    (MERIT)

The changing wage and employment structure in some OECD countries has beenattributed to increased levels of education and technical change in favour of skilledworkers. However, in the Netherlands and some other OECD countries the wages ofskilled workers did not rise, whereas investment in skills rose dramatically. This paperoffers a theory which is able to explain the dramatic increase in the level of education andskills without rising wages since the early 1980s. In this respect, we integrate the supplyside framework (human capital investments) and the demand side (containingendogenous skill upgrading as a result of job competition and screening) in a generalequilibrium model. In this way we provide a theory for the empirical observation ofrising unemployment levels among unskilled workers and rising employment levels ofskilled workers with relatively stable wages.

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Paper provided by Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT) in its series Research Memorandum with number 030.

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Date of creation: 1999
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Handle: RePEc:unm:umamer:1999030
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  19. Madsen, Jakob B, 1998. "General Equilibrium Macroeconomic Models of Unemployment: Can They Explain the Unemployment Path in the OECD?," Economic Journal, Royal Economic Society, vol. 108(448), pages 850-67, May.
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  21. Blanchard, Olivier Jean & Diamond, Peter, 1992. "The Flow Approach to Labor Markets," American Economic Review, American Economic Association, vol. 82(2), pages 354-59, May.
  22. Nickell, Stephen, 1998. "Unemployment: Questions and Some Answers," Economic Journal, Royal Economic Society, vol. 108(448), pages 802-16, May.
  23. Spence, A Michael, 1973. "Job Market Signaling," The Quarterly Journal of Economics, MIT Press, vol. 87(3), pages 355-74, August.
  24. Layard, Richard & Nickell, Stephen & Jackman, Richard, 2005. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780199279173, March.
  25. Phelps, Edmund S & Zoega, Gylfi, 1998. "Natural-Rate Theory and OECD Unemployment," Economic Journal, Royal Economic Society, vol. 108(448), pages 782-801, May.
  26. Layard, Richard & Nickell, Stephen, 1986. "Unemployment in Britain," Economica, London School of Economics and Political Science, vol. 53(210(S)), pages S121-69, Supplemen.
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