Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5099503 | Journal of Economic Dynamics and Control | 2011 | 17 Pages |
Abstract
To examine the cyclical behavior of the skill-premium, this paper introduces implicit labor contracts in a DSGE model where production is characterized by capital-skill complementarity and the utilization of capital is endogenous. It is shown that this model can reproduce the observed cyclical patterns of wages and the skill-premium. The feature of capital-skill complementarity coupled with variable capital utilization rates does not come at odds with the acyclical behavior of the skill-premium. The paper argues that the skill-complementarity of capital is not a quantitatively significant factor at high frequencies. The key aspects are the contracts and the capital utilization margin.
Related Topics
Physical Sciences and Engineering
Mathematics
Control and Optimization
Authors
Panayiotis M. Pourpourides,