Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/25266
Authors: 
Xie, Runli
Year of Publication: 
2008
Series/Report no.: 
SFB 649 discussion paper 2008,024
Abstract: 
A large body of literature explains the inferior position of unskilled workers by imposing a structural shift in the labor force skill composition. This paper takes a different approach by emphasizing the connection between cyclical variations in skilled and unskilled labor markets. Using a stylized business cycle model with search frictions in the respective sub-markets, I find that imperfect substitution between skilled and unskilled labor creates a channel for the variations in the sub-markets. Together with a general labor augmenting technology shock, it can generate downward sloping Beveridge curves. Calibrating the model to US data yields higher volatilities in the unskilled labor markets and reproduces stylized business cycle facts.
Subjects: 
business cycle
search frictions
skill specic unemployment
skill substitutability
JEL: 
E24
E32
J63
Document Type: 
Working Paper

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