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Skill-biased technological change and endogenous labor supply in EU Transition Economies and the US

  • Guido Cazzavillan

    ()

    (Department of Economics, University Of Venice C� Foscari)

  • Krzysztof Olszewski

    ()

    (Department of Economics, University Of Venice C� Foscari)

In this paper skill-biased technological change is linked with endogenous labor supply which allows for unemployment. This is a novel approach, as the literature on skill-biased technological change considers inelastic labor supply. Elastic labor supply allows us to explain how the observed increasing unemployment of unskilled workers is caused by skill-biased technological change. Our numerical analysis shows that if the skill-biased technological change is not followed by the growth of total factor productivity, then output, physical capital stock and consumption decline. Using empirical data on wages and education, we construct a time series for skill-biased technological change for Poland and the US. The empirical relevance of the model is tested by calibrating it to empirical data for Poland over the period 1996-2006 and US over the period 1992-2008. With only two necessary inputs, share of skilled workers in total population and the technology adopted by firms, this model allows to simulate the future behaviour of the labor market.

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Paper provided by Department of Economics, University of Venice "Ca' Foscari" in its series Working Papers with number 2009_12.

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Length: 29
Date of creation: 2009
Handle: RePEc:ven:wpaper:2009_12
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