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IZA
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Low-Skilled Unemployment, Biased Technological Shocks and Job Competition
by
Olivier Pierrard, Henri R. Sneessens
(May 2003)
revised version published as "Biased Technological Shocks, Relative Wage Rigidities and Low-Skilled Unemployment”in Scottish Journal of Political Economy, 2008, 55(3), 330-352
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 “crowdingout”
mechanisms. When such interactions are accounted for, the model reproduces quite well
the observed unemployment changes.
Text: See Discussion Paper No. 784
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