Low-Skilled Unemployment, Biased Technological Shocks and Job Competition

32 Pages Posted: 11 Jun 2003

See all articles by Olivier Pierrard

Olivier Pierrard

Banque Centrale du Luxembourg; IRES, UCL

Henri R. Sneessens

Catholic University of Louvain (UCL) - Institut de Recherches Economiques et Sociales (IRES); IZA Institute of Labor Economics

Date Written: May 2003

Abstract

The unemployment rise in EU countries has been particularly strong for low-skilled workers. This observation has often been explained in terms of biased technical change and relative wage rigidities. More attention has been paid recently to an alternative mechanism, the crowding-out of low-skilled workers by over-qualified workers. The objective of this paper is both methodological and empirical. We construct a dynamic general equilibrium model with two types of jobs and two types of workers and with search unemployment. The model is calibrated and simulated to examine the interactions between the "skill bias" and "crowding-out" mechanisms. When such interactions are accounted for, the model reproduces quite well the observed unemployment changes.

Keywords: Skill Bias, Equilibrium Search Unemployment, Ladder Effect, Crowding-out, Over-education

JEL Classification: E24, J21, J23

Suggested Citation

pierrard, olivier and Sneessens, Henri, Low-Skilled Unemployment, Biased Technological Shocks and Job Competition (May 2003). Available at SSRN: https://ssrn.com/abstract=412490 or http://dx.doi.org/10.2139/ssrn.412490

Olivier Pierrard

Banque Centrale du Luxembourg ( email )

2, boulevard Royal
Luxembourg, L-2983
Luxembourg

IRES, UCL ( email )

3, Place Montesquieu
1348 Louvain-la-Neuve
Belgium

Henri Sneessens (Contact Author)

Catholic University of Louvain (UCL) - Institut de Recherches Economiques et Sociales (IRES) ( email )

3, Place Montesquieu
1348 Louvain-la-Neuve
Belgium
+ (32) 10 47 39 62 (Phone)
+ (32) 10 47 39 45 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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