DP689 | Are the Unemployed Unemployable?

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Publication Date

27/08/1992

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Abstract

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.