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LABOR MARKET VOLATILITY, SKILLS, AND FINANCIAL GLOBALIZATION

Published online by Cambridge University Press:  03 April 2013

Claudia M. Buch  and
Christian Pierdzioch
Claudia M. Buch
Affiliation:
University of Tübingen IAW and CESifo
Christian Pierdzioch*
Affiliation:
Helmut Schmidt University
*
Address correspondence to: Christian Pierdzioch, Department of Economics, Helmut-Schmidt-University, Holstenhofweg 85, 22008 Hamburg, Germany; e-mail: c.pierdzioch@hsu-hh.de.
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Abstract

We analyze the impact of financial globalization on volatilities of hours worked and wages of high-skilled and low-skilled workers. Using cross-country, industry-level data for the years 1970–2004, we establish stylized facts that document how volatilities of hours worked and wages of workers with different skill levels have changed over time. We then document that the volatility of hours worked by low-skilled workers has increased the most in response to the increase in financial globalization. We develop a dynamic stochastic general equilibrium model of a small open economy that is consistent with the empirical results. The model predicts that greater financial globalization increases the volatility of hours worked, and this effect is strongest for low-skilled workers.

Keywords

Labor-Market VolatilitySkill LevelsFinancial Globalization
Type
Articles
Information
Macroeconomic Dynamics , Volume 18 , Issue 5 , July 2014 , pp. 1018 - 1047
Copyright
Copyright © Cambridge University Press 2013 

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