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Innovations induce asymmetric employment movements

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  • Zwick, Thomas

Abstract

This paper provides a labour supply explanation to the observation that in Germany employment changes are asymmetric during the business cycle. Employment increases are slower, because the reservation wage of workers increases in times of job uncertainty. Workers are afraid in those periods of losing their sunk and necessary human capital investments. They weigh the risks and benefits of investing in human capital with their certain outside option when they decide about staying in the labour market. Human capital investments are sunk and necessary, because firms need new skills while older skills get obsolete at a constant rate. Skill obsolescence is induced by innovations.

Suggested Citation

  • Zwick, Thomas, 1999. "Innovations induce asymmetric employment movements," ZEW Discussion Papers 99-24, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  • Handle: RePEc:zbw:zewdip:5240
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    References listed on IDEAS

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    1. Franz, Wolfgang, 1990. "Hysteresis in Economic Relationships: An Overview," Empirical Economics, Springer, vol. 15(2), pages 109-125.
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    More about this item

    JEL classification:

    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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