Skill Shortages, Labor Reallocation, and Growth

Pascal Hetze

No 59, Thuenen-Series of Applied Economic Theory from University of Rostock, Institute of Economics, Germany

Abstract: This paper explores the relationship between growth and unemployment. Knowledge formation is the source of growth, which includes the two dimensions technologies and skills. Both are connected through a technology-skill complementarity which may have limiting effects on the reallocation of labor and technology implementation in manufacturing. The reallocation of labor becomes necessary as growth leads to continuous job creation and job destruction. The ratio of job destruction to job creation identifies three regimes, two of which are associated with unemployment either due to restricted labor demand or due to skill shortages. While in the regime with full employment the model confirms the standard result that knowledge formation has positive effects on growth, the outcome is much more ambiguous if we consider a possible technology-skill mismatch and unemployment.

Keywords: endogenous growth; knowledge formation; unemployment; skill mismatch (search for similar items in EconPapers)
JEL-codes: E24 J63 O33 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dev and nep-mac
Date: Written

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Persistent link: http://EconPapers.repec.org/RePEc:ros:wpaper:59

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