@techreport{Weiss2005Skill,
abstract = {In this paper, we study the effect of skill-biased technological change on
unemployment when benefits are linked to the evolution of average income and when this
is not the case. In the former case, an increase in the productivity of skilled workers
and hence their wage leads to an increase in average income and hence in benefits. The
increased fallback income, in turn, makes unskilled workers ask for higher wages. As higher
wages are not justified by respective productivity increases, unemployment rises. More
generally, we show that skill-biased technological change leads to increasing unemployment
of the unskilled when benefits are endogenous.
The model provides a theoretical explanation for diverging developments in wage inequality
and unemployment under different social benefits regimes: Analyzing the social
legislation in 14 countries, we find that benefits are linked to the evolution of average
income in Continental Europe but not in the U.S. and the UK. Given this institutional
difference, our model predicts that skill-biased technological change leads to rising unemployment
in Continental Europe and rising wage inequality in the U.S. and the UK.},
address = {Mannheim},
author = {Matthias Weiss and Alfred Garloff},
copyright = {http://www.econstor.eu/dspace/Nutzungsbedingungen},
keywords = {O30; E24; J50; J31; 330; Unemployment; Skill-Biased Technological Change; Benefits; Arbeitslosigkeit; Lohnstruktur; Technischer Fortschritt; Qualifikation; Mehr-Sektoren-Modell; Faktorsubstitution; Relativer Preis; Theorie},
language = {eng},
number = {05-79},
publisher = {Zentrum f\"{u}r Europ\"{a}ische Wirtschaftsforschung (ZEW)},
title = {Skill Biased Technological Change and Endogenous Benefits: The Dynamics of Unemployment and Wage Inequality},
type = {ZEW Discussion Papers},
url = {http://hdl.handle.net/10419/24175},
year = {2005}
}
