Hostname: page-component-78c5997874-v9fdk Total loading time: 0 Render date: 2024-11-10T19:39:53.941Z Has data issue: false hasContentIssue false
  • English
  • Français

JOB COMPETITION, CROWDING OUT, AND UNEMPLOYMENT FLUCTUATIONS

Published online by Cambridge University Press:  20 September 2010

Sherif Khalifa
Sherif Khalifa*
Affiliation:
California State University, Fullerton
*
Address correspondence to: Sherif Khalifa, Steven G. Mihaylo College of Business and Economics, Department of Economics, California State University, Fullerton, CA 92834, USA, e-mail: skhalifa@fullerton.edu.
Get access Rights & Permissions [Opens in a new window]

Abstract

This paper attempts to determine the factors generating the persistence of unemployment over the business cycle. The observations show that the total unemployment rate is highly persistent, and that the persistence of the unemployment rate of unskilled workers is higher than that of skilled workers. To account for these observations, the paper develops a framework that features search frictions. Individuals are either high educated or low educated, and firms post two types of vacancies: the complex, which can be matched with the high educated, and the simple, which can be matched with the high and the low educated. On-the-job search for a complex occupation is undertaken by the high educated in simple occupations. A negative aggregate technological shock induces the high educated unemployed to compete with the low educated by increasing 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 in a cyclical downturn, or the increase in the labor input of the high educated in simple occupations, and the subsequent crowding out of the low educated into unemployment, provide a possible explanation for unemployment persistence.

Keywords

UnemploymentBusiness CycleSearch and Matching
Type
Articles
Information
Macroeconomic Dynamics , Volume 16 , Issue 1 , February 2012 , pp. 1 - 34
Copyright
Copyright © Cambridge University Press 2010

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

REFERENCES

Devereux, Paul (2000) Task assignment over the business cycle. Journal of Labor Economics 18 (1), 98–124.CrossRefGoogle Scholar
Devereux, Paul (2004) Cyclical quality adjustment in the labor market. Southern Economic Journal 70 (3), 600–615.Google Scholar
Eriksson, Stefan (2006) Skill loss, ranking of job applicants and dynamics of unemployment. German Economic Review 7 (3), 265–296.CrossRefGoogle Scholar
Eriksson, Stefan and Gottfries, Nils (2005) Ranking of job applicants, on-the-job search, and persistent unemployment. Labour Economics 12, 407–428.CrossRefGoogle Scholar
Esteban-Pretel, Julen (2005) The Effects of the Loss of Skill on Unemployment Fluctuations. CIRJE Working Paper F-371.Google Scholar
Esteban-Pretel, Julen and Faraglia, Elisa (2005) Monetary Shocks in a Model with Loss of Skills. CIRJE Working Paper F-380.Google Scholar
Gautier, Pieter (2002) Unemployment and search externalities in a model with heterogeneous jobs and workers. Economica 69, 21–40.CrossRefGoogle Scholar
Hall, Robert (2005) Job loss, job finding and unemployment in the U.S. economy over the past fifty years. NBER Macroeconomics Annual, 101–137.CrossRefGoogle Scholar
Hosios, Arthur (1990) On the efficiency of matching and related models of search and unemployment. Review of Economic Studies 57 (2), 279–298.CrossRefGoogle Scholar
Krause, Michael and Lubik, Thomas (2004) On-the-Job Search and the Cyclical Dynamics of the Labor Market. European Central Bank Working Paper 779.Google Scholar
Pries, Michael (2004) Persistence of employment fluctuations: A model of recurring job loss. Review of Economic Studies 71 (1), 193–215.CrossRefGoogle Scholar
Shimer, Robert (2005) The cyclicality of hires, separations and job to job transitions. Federal Reserve Bank of St. Louis Review 87 (4), 493–507.Google Scholar
Sims, Christopher (2002) Solving linear rational expectations models. Computational Economics 20 (1–2), 1–20.CrossRefGoogle Scholar