Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/56737
Authors: 
Xie, Runli
Year of Publication: 
2011
Series/Report no.: 
SFB 649 discussion paper 2011-011
Abstract: 
Human capital investment is formed through households' endogenous decision, and competes with physical capital investment. Idiosyncratic shock shifts the skilled labor share and changes tightness in both skilled and unskilled markets. Given inelastic labor participation, the model can generate downward-sloping Beveridge curves in aggregate, skilled and unskilled labor markets. Upon a neutral shock, total unemployment decrease is two-staged: firstly with a reduction in unskilled unemployment, and then due to a sharp decline of skilled unemployment when skill substitution dominates. A higher elasticity of substitution between two types of labor leads to higher volatility of the model variables and higher u - v correlation.
Subjects: 
skill-specific unemployment
human capital investment
idiosyncratic shock
skill substitution
search and matching
JEL: 
E24
E32
J24
J63
Document Type: 
Working Paper

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