Education, Wages, and Unemployment in a Matching Model of the Labor Market

Economics

Speaker:Xavier Mateos-Planas, University of Southampton
Date: Friday 23 November 2001
Time: 16:15
Location: Room 106 Streatam Court

Further details

(joint with Xavier Cuadras-Morato, Universitat Pompeu Fabra)

The objective of this paper is to investigate the interaction between labor market developments and changes in educational attainment. To this end, the paper develops an equilibrium search and matching model of a labor market that is segmented by education levels. Two main innovative features of the model are the following. First, workers decide on education status and segment participation. Second, firms target labor market segments and decide about capital investments and which types of worker to hire taking into account the skill composition of the labor force in the different segments. The assumption of imperfect correlation between skill and education status implies that endogenous changes in education may have implications for equilibrium unemployment and wages across education groups. Calibrated versions of the model are used to study how either skill-biased technical change or an increase in mismatch may explain the behavior of labor market variables --- the wage premium and education-specific unemployment rates --- and educational attainment in the US between 1970 and 1990.