Macroeconomic Uncertainty and Capital-Skill Complementarity

Macroeconomic Uncertainty and Capital-Skill Complementarity
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Volume/Issue: Volume 2023 Issue 155
Publication date: August 2023
ISBN: 9798400250316
$20.00
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Topics covered in this book

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Labor , Economics- Macroeconomics , Economics / General , Stochastic volatility , Capital-skill complementarity , Relative wages , Skill premium , , uncertainty shock , SVAR impulse response , SVAR methodology , A , solution method , A , Detrending method , Wages , Skilled labor , Labor supply , Employment , Europe

Summary

I examine the impact of macroeconomic uncertainty on labor market outcomes for skilled and unskilled workers and propose a new channel to improve our understanding of the underlying propagation mechanisms. I find that uncertainty shocks are recessionary with the unskilled experiencing a steeper fall in employment. To rationalize these findings, I build a New Keynesian DSGE model with skill heterogeneity and wage rigidities, which, coupled with precautionary labor supply, significantly amplify contractionary effects of uncertainty on the real economy.