Low-Skilled Unemployment, Biased Technological Shocks and Job Competition
32 Pages Posted: 11 Jun 2003
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: Suggested Citation
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