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Endogenous Skill Cycles

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  • Francesco Busato
  • Enrico Marchetti

Abstract

This paper explores the ability of a class of one-sector models to generate endogenous skills cycles. Skills cycles are here defined as endogenous fluctuations of the composition of equilibrium allocation of labor services. We consider a one sector economy in which there exist one type of capital stock, and a finite number of different labor services, which are assumed to be heterogeneous along the skill/productivity dimension. We apply the Hopf bifurcation theorem and provide necessary conditions on the model's parameters for having a closed orbit as the economy's stable set. We also develop a numerical example (based on the United States economy) showing how this closed orbit can appear under reasonable parameter values.

Suggested Citation

  • Francesco Busato & Enrico Marchetti, 2009. "Endogenous Skill Cycles," Working Papers in Public Economics 127, Department of Economics and Law, Sapienza University of Roma.
    • Handle: RePEc:sap:wpaper:wp127
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    More about this item

    Keywords

    Business fluctuations; Cycles; Skills.;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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