Labor Supply Dynamics, Unemployment and Human Capital Investments

Etienne Wasmer

No 651, Seminar Papers from Stockholm University, Institute for International Economic Studies

Abstract: In the last decades, the OECD labor markets faced important labor supply changes with the arrival of women and the cohorts of the baby-boom. Using a survey where workers declare their true employment experience, this paper argues that the supply trend can be equivalent to a trend of more inexperienced workers. The paper proposes to investigate the potentially important consequences of the dynamics of labor supply trends on the skill composition of the labor force, between-groups wage inequality and the level of unemployment. The mechanism highlighted here is that, in periods of sustained growth of of the active population, the labor force is younger and less experienced, which may increase the wage return to 'experience' and lead to higher unemployment among low-experience workers. They do not accumulate enough on-the-job human capital, and this reduces in the long run the supply of skilled workers and the demand for unskilled workers. This intertemporal multiplication of supply shocks generates multiple equilibria. When human capital investment decisions are introduced, low-experience groups try to improve their outcome on the labor market; new cohorts invest in education, women invest in on-the-job skills.

Keywords: Wage inequality; Education; Experience; Labor Supply (search for similar items in EconPapers)
JEL-codes: E24 J21 J31 (search for similar items in EconPapers)
Pages: 43 pages
Date: 1998-09-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Working Paper: Labour Supply Dynamics, Unemployment and Human Capital Investments (2004)
Working Paper: Labour Supply Dynamics, Unemployment and Human Capital Investments (2004)
Working Paper: Labor Supply Dynamics, Umemployment and Human Capital Investments (2002)
Working Paper: Labor Supply Dynamics, Unemployment and Human Capital Investments (1998)
Working Paper: Labour Supply Dynamics, Unemployment and Human Capital Investments (1998)
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