Macroeconomic Uncertainty and Capital-Skill Complementarity

Anna Belianska

No 2023/155, IMF Working Papers from International Monetary Fund

Abstract: I examine the impact of macroeconomic uncertainty on labor market outcomes for skilled and unskilled workers and propose a new channel to improve our understanding of the underlying propagation mechanisms. I find that uncertainty shocks are recessionary with the unskilled experiencing a steeper fall in employment. To rationalize these findings, I build a New Keynesian DSGE model with skill heterogeneity and wage rigidities, which, coupled with precautionary labor supply, significantly amplify contractionary effects of uncertainty on the real economy.

Keywords: Stochastic volatility; Capital-skill complementarity; Relative wages; Skill premium.; uncertainty shock; SVAR impulse response; SVAR methodology; A. solution method; A. Detrending method; Wages; Skilled labor; Labor supply; Employment; Europe (search for similar items in EconPapers)
Pages: 74
Date: 2023-08-04
New Economics Papers: this item is included in nep-dge and nep-lab
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