Implicit Contracts and the Cyclicality of the Skill-Premium
Panayiotis Pourpourides ()
No E2007/19, Cardiff Economics Working Papers from Cardiff University, Cardiff Business School, Economics Section
To examine the cyclical behavior of the skill-premium, this paper introduces implicit labor contracts in a DSGE model where production is characterized by capital-skill complementarity and the utilization of capital is endogenous. It is shown that this model can reproduce the observed cyclical patterns of wages and the skill-premium. The feature of capital-skill complementarity coupled with variable capital utilization rates does not come at odds with the acyclical behavior of the skill-premium. The paper argues that the skill-complementarity of capital is not a quantitatively significant factor at high frequencies. The key aspects are the contracts and the capital utilization margin.
Keywords: Implicit Contracts; Wages; Skill-Premium; Business Cycles; Capital-Skill Complementarity (search for similar items in EconPapers)
JEL-codes: E13 E24 E32 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2007-06, Revised 2010-04
New Economics Papers: this item is included in nep-bec, nep-dge, nep-lab and nep-mac
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Published in Journal of Economic Dynamics and Control , Volume 35, 2011, 963-979
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Journal Article: Implicit contracts and the cyclicality of the skill-premium (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:cdf:wpaper:2007/19
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