nr 020 - Biased Technological Shocks, Wage Rigidities and Low-Skilled Unemployment
- DNB Working Papers
-
Date 14 December 2004
The contrast between the evolution over the last decades of the 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 emphasise the interactions
between technological changes and wages ridigities. 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 wages 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. Key words: unemployent,
skill biased changes, wage rigidities Jel codes: E24, J24, J 31