Labor Supply with Job Assignment under Balanced Growth

Claudio Michelacci () and Josep Pijoan-Mas

No 9296, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We consider a competitive equilibrium growth model where technological progress is embodied into new jobs that are assigned to workers of different skills. In every period workers decide whether to actively participate in the labor market and if so how many hours to work on the job. Balanced growth requires that the job technology is complementary with the worker?s total labor input in the job, which is jointly determined by his skill and his working hours. Since lower skilled workers can supply longer hours, we show that the equilibrium features positive assortative matching (higher skilled workers are assigned to better jobs) only if differences in consump- tion are small relative to differences in worker skills. When the pace of technological progress accelerates, wage inequality increases and workers participate less often in the labor market but supply longer hours on the job. This mechanism can explain why, as male wage inequality has increased in the US, labor force participation of male workers of different skills has fallen while their working hours have increased.

Keywords: Job heterogeneity; Participation; Wage inequality; Working hours (search for similar items in EconPapers)
JEL-codes: E24 G31 J31 (search for similar items in EconPapers)
Date: 2013-01
New Economics Papers: this item is included in nep-dge, nep-lab and nep-mac
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Related works:
Journal Article: Labor supply with job assignment under balanced growth (2016)
Working Paper: Labor Supply with Job Assignment under Balanced Growth (2014)
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