Macroeconomic Uncertainty and Capital-Skill Complementarity
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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.
Series:
Working Paper No. 2023/155
Subject:
Employment Labor Labor supply Skilled labor Wages
Frequency:
regular
English
Publication Date:
August 4, 2023
ISBN/ISSN:
9798400250316/1018-5941
Stock No:
WPIEA2023155
Format:
Paper
Pages:
74
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