Cyclical job upgrading, wage inequality, and unemployment dynamics
Khalifa, Sherif
Cyclical job upgrading, wage inequality, and unemployment dynamics created by Sherif Khalifa - International economic journal Volume 27, number 4 .
This paper studies the implications of a monetary policy shock on the skill premium and the unemployment persistence. A VAR demonstrates that a contractionary policy induces a lagged decline in the skill premium and a larger and more persistent increase in the unemployment ratio of the unskilled relative to that of the skilled. A new Keynesian framework characterized by labor search frictions is developed. The labor force is divided into high and low educated. Firms post two types of vacancies: the complex that can be matched with the high educated, and the simple that can be matched with both the high and the low educated. A positive shock to the nominal interest rate induces the high educated unemployed to compete with the low educated, as they increase their search intensity for simple vacancies. As the high educated occupy simple vacancies, they crowd out the low educated into unemployment. This downgrading of jobs, and the subsequent crowding out of the low educated into unemployment, provide a possible explanation to unemployment persistence and the response of the skill premium.
10168737
Monetary policy--Theory, Unemployment--Search and matching,Sticky prices
HB1A1 INT
Cyclical job upgrading, wage inequality, and unemployment dynamics created by Sherif Khalifa - International economic journal Volume 27, number 4 .
This paper studies the implications of a monetary policy shock on the skill premium and the unemployment persistence. A VAR demonstrates that a contractionary policy induces a lagged decline in the skill premium and a larger and more persistent increase in the unemployment ratio of the unskilled relative to that of the skilled. A new Keynesian framework characterized by labor search frictions is developed. The labor force is divided into high and low educated. Firms post two types of vacancies: the complex that can be matched with the high educated, and the simple that can be matched with both the high and the low educated. A positive shock to the nominal interest rate induces the high educated unemployed to compete with the low educated, as they increase their search intensity for simple vacancies. As the high educated occupy simple vacancies, they crowd out the low educated into unemployment. This downgrading of jobs, and the subsequent crowding out of the low educated into unemployment, provide a possible explanation to unemployment persistence and the response of the skill premium.
10168737
Monetary policy--Theory, Unemployment--Search and matching,Sticky prices
HB1A1 INT