Macroeconomic Uncertainty and Capital-Skill Complementarity

Author/Editor:

Anna Belianska

Publication Date:

August 4, 2023

Electronic Access:

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

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:

Frequency:

regular

English

Publication Date:

August 4, 2023

ISBN/ISSN:

9798400250316/1018-5941

Stock No:

WPIEA2023155

Format:

Paper

Pages:

74

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