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BIASED TECHNOLOGICAL SHOCKS, RELATIVE WAGE RIGIDITIES AND LOW‐SKILLED UNEMPLOYMENT
Author(s) -
Pierrard Olivier,
Sneessens Henri R.
Publication year - 2008
Publication title -
scottish journal of political economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.4
H-Index - 46
eISSN - 1467-9485
pISSN - 0036-9292
DOI - 10.1111/j.1467-9485.2008.00456.x
Subject(s) - economics , unemployment , wage , labour economics , wage dispersion , efficiency wage , dispersion (optics) , construct (python library) , technological change , wage bargaining , general equilibrium theory , macroeconomics , physics , computer science , optics , programming language
The contrast between the evolution over the last decades of the European Union (EU) and the US unemployment rates, especially for the low‐skilled, is well known. A consensus view is that these different outcomes can be explained by the interactions between common shocks and specific institutional setups. In this paper, we emphasize the interactions between technological changes and wages rigidities. We construct a fully calibrated general equilibrium model with two types of jobs and two types of workers, and with search unemployment. Our simulations show that with wage rigidities, technological changes suffice to generate a continuous rise in the low‐skilled unemployment rate and an almost unchanged high‐skilled unemployment rate. Without wage rigidities, the unemployment rates remain unchanged but the wage dispersion widens.