Heterogeneous Labor, Labor Market Frictions and Employment Effects of Technological Change. Theory and Empirical Evidence for the U.S. and Europe

Jens Rubart ()

Publications of Darmstadt Technical University, Institute for Business Studies (BWL) from Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL)

Abstract: During the last two decades the so called IT revolution has led to a diverse pattern of growth and employment in OECD countries. In particular, anglo-saxon economies like the U.S. or the U.K. exhibited high rates of economic performance and low unemployment rates, whereas continental European countries showed low economic growth and high unemployment rates. Based on the findings of Lindquist (2004) that the relative demand for workers of different skills (measured by the variation of educational wage differences) varies significantly over the business cycle, we develop a dynamic general equilibrium model which accounts for skill biased technology shocks as well as for the employment record of labor which is divided into different categories of skills. Furthermore, the labor market is characterized by search and matching frictions which allows us to analyze different kinds of institutional settings which determine the negotiated wage rates as well as the demand for labor of the respective skill group. In particular, the latter assumption enables us to control for stylized facts of continental European labor markets. By confronting our theoretical results to empirical evidences it is shown that labor market frictions are necessary to reproduce empirical findings as the lagged response of output, wages and employment after unanticipated shocks to technology.

JEL-codes: E32 J21 J23 J24 J31 J41 (search for similar items in EconPapers)
Date: 2009
Note: for complete metadata visit http://tubiblio.ulb.tu-darmstadt.de/77409/
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Published in Darmstadt Discussion Papers in Economics . 158 (2009)

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Related works:
Working Paper: Heterogeneous Labor, Labor Market Frictions and Employment Effects of Technological Change. Theory and Empirical Evidence for the U.S. and Europe (2006)
Working Paper: Heterogeneous Labor, Labor Market Frictions and Employment Effects of Technological Change. Theory and Empirical Evidence for the U.S. and Europe (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:dar:wpaper:77409

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