DP689 Are the Unemployed Unemployable?

Author(s): Gilles Saint-Paul
Publication Date: August 1992
Keyword(s): Dual Labour Markets, Matching, Productivity, Unemployment
JEL(s): E24, J21, J31, J63
Programme Areas: International Macroeconomics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=689

This paper develops a matching model of the labour market under wage rigidity when hiring decisions are irreversible. There are two types of workers, the skilled and the unskilled. The model is used to analyse whether technological advances may have increased unemployment, and shows that this is likely to occur if technological change is associated with an increase in the productivity and/or the supply of skilled relative to unskilled workers. These effects are stronger when hiring decisions are more irreversible.