Employment Effects of Skill Biased Technological Change when Benefits are Linked to Per-Capita Income

Matthias Weiss

No 4043, MEA discussion paper series from Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy

Abstract: This paper studies the employment effects of technological change when benefits are endogenous. If the (i) level of welfare aid depends on the general income level in the economy and (ii) wages for unskilled workers cannot fall below the level of welfare aid, there is a link between the wage for unskilled labor and the productivity of skilled labor. An increase in the latter will lead to an increase in average income and hence the level of welfare aid. This in turn leads unions to ask for higher wages for unskilled workers. Technological change is shown to have employment effects (only) if it is skill-biased and if this link exists.

JEL-codes: E24 J31 J50 O30 (search for similar items in EconPapers)
Date: 2004-01-22
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