Reference : Biased Technological Shocks, Relative Wage Rigidities and Low-Skilled Unemployment
Scientific journals : Article
Business & economic sciences : Macroeconomics & monetary economics
Biased Technological Shocks, Relative Wage Rigidities and Low-Skilled Unemployment
Sneessens, Henri mailto [Université Catholique de Louvain - UCL > IRES - Institut de recherches économiques et sociales]
Pierrard, Olivier [University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Center for Research in Economic Analysis (CREA) >]
Scottish Journal of Political Economy
Blackwell Publishing
Yes (verified by ORBilu)
[en] The contrast between the evolution over the last decades of the European Union (EU) and the US unemployment rates, especially for the low-skilled, is well known. A consensus view is that these different outcomes can be explained by the interactions between common shocks and specific institutional setups. In this paper, we emphasize the interactions between technological changes and wages rigidities. We construct a fully calibrated general equilibrium model with two types of jobs and two types of workers, and with search unemployment. Our simulations show that with wage rigidities, technological changes suffice to generate a continuous rise in the low-skilled unemployment rate and an almost unchanged high-skilled unemployment rate. Without wage rigidities, the unemployment rates remain unchanged but the wage dispersion widens.

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