Unskilled workers in an economy with skill-biased technology

Shouyong Shi

No WP-99-5, Working Paper Series from Federal Reserve Bank of Chicago

Abstract: This paper contributes to the search theory of unemployment by endogenously generating matching functions for skilled and unskilled workers from a wage-posting game. The model is capable of producing a positive skill premium and a positive wage differential among homogenous unskilled workers. The skill premium arises from a skill-biased technology; the wage differential among unskilled workers sustains because a lower wage is compensated by a higher change of getting the job. The model provides useful explanations for the observed dynamics patterns of within-skill and between-skill wage differentials in the 1970s and 1980s and for the relative cyclical volatility of hours of worker by different skill groups of workers.

Keywords: Unemployment; Wages; Technology (search for similar items in EconPapers)
Date: 1999
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Related works:
Working Paper: Unskilled Workers In An Economy With Skill-biased Technology (1999)
Working Paper: Unskilled Workers in an Economy with Skill-Biased Technology (1998)
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