IDEAS home Printed from https://ideas.repec.org/p/bge/wpaper/1347.html
   My bibliography  Save this paper

Labor Force Participation, Wages and Turbulence

Author

Listed:
  • Francesc Obiols-Homs
  • Virginia Sánchez-Marcos

Abstract

Participation of middle aged men with upper secondary education or less has decreased over the last two decades in the US. This comes together with wage stagnation for this demographic group. In this paper we use a general equilibrium model of the labor market with frictions, participation decisions and endogenous accumulation of skills through a learning by doing technology in order to understand these facts. We quantitatively assess the implications of an increase in the probability of skills loss during non-employment spells (turbulence, after Ljungqvist and Sargent, 1998) and show that non-participation increases and wages of more experienced workers fall because with increased turbulence their outside option worsens.

Suggested Citation

  • Francesc Obiols-Homs & Virginia Sánchez-Marcos, 2022. "Labor Force Participation, Wages and Turbulence," Working Papers 1347, Barcelona School of Economics.
    • Handle: RePEc:bge:wpaper:1347
    as

    Download full text from publisher

    File URL: https://bse.eu/sites/default/files/working_paper_pdfs/1347.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. repec:hal:pseose:halshs-01314291 is not listed on IDEAS
    2. Hyeok Jeong & Yong Kim & Iourii Manovskii, 2015. "The Price of Experience," American Economic Review, American Economic Association, vol. 105(2), pages 784-815, February.
    3. Peter Gottschalk & Robert Moffitt, 2009. "The Rising Instability of U.S. Earnings," Journal of Economic Perspectives, American Economic Association, vol. 23(4), pages 3-24, Fall.
    4. Thomas Sargent & Lars Ljungqvist & Isaac Baley, 2017. "Turbulence and Unemployment in Matching Models," 2017 Meeting Papers 1391, Society for Economic Dynamics.
    5. repec:hal:spmain:info:hdl:2441/8921 is not listed on IDEAS
    6. Lars Ljungqvist & Thomas J. Sargent, 1998. "The European Unemployment Dilemma," Journal of Political Economy, University of Chicago Press, vol. 106(3), pages 514-550, June.
    7. Pietro Garibaldi & Etienne Wasmer, 2005. "Equilibrium Search Unemployment, Endogenous Participation, And Labor Market Flows," Journal of the European Economic Association, MIT Press, vol. 3(4), pages 851-882, June.
    8. Lars Ljungqvist & Thomas J. Sargent, 2004. "European Unemployment and Turbulence Revisited in a Matching Model," Journal of the European Economic Association, MIT Press, vol. 2(2-3), pages 456-468, 04/05.
    9. Saint-Paul, Gilles, 2015. "Can active labor market policy be counter-productive?," Research in Economics, Elsevier, vol. 69(1), pages 26-36.
    10. Daron Acemoglu & Pascual Restrepo, 2020. "Robots and Jobs: Evidence from US Labor Markets," Journal of Political Economy, University of Chicago Press, vol. 128(6), pages 2188-2244.
    11. David H. Autor & David Dorn & Gordon H. Hanson, 2015. "Untangling Trade and Technology: Evidence from Local Labour Markets," Economic Journal, Royal Economic Society, vol. 0(584), pages 621-646, May.
    12. Olivier Blanchard, 2007. "A Review of Richard Layard, Stephen Nickell, and Richard Jackman's Unemployment: Macroeconomic Performance and the Labour Market," Journal of Economic Literature, American Economic Association, vol. 45(2), pages 410-418, June.
    13. Nicola Pavoni & G. L. Violante, 2007. "Optimal Welfare-to-Work Programs," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 74(1), pages 283-318.
    14. Hyatt, Henry R. & Spletzer, James R., 2016. "The shifting job tenure distribution," Labour Economics, Elsevier, vol. 41(C), pages 363-377.
    15. Pietro Garibaldi & Etienne Wasmer, 2005. "Equilibrium Search Unemployment, Endogenous Participation and Labor Market Flows," SciencePo Working papers hal-01020784, HAL.
    16. repec:hal:wpspec:info:hdl:2441/8921 is not listed on IDEAS
    17. Michael W. L. Elsby & Matthew D. Shapiro, 2012. "Why Does Trend Growth Affect Equilibrium Employment? A New Explanation of an Old Puzzle," American Economic Review, American Economic Association, vol. 102(4), pages 1378-1413, June.
    18. Isaac Baley & Lars Ljungqvist & Thomas J. Sargent, 2018. "Quit Turbulence and Unemployment," Working Papers 1019, Barcelona School of Economics.
    19. Ljungqvist, Lars & Sargent, Thomas J., 2007. "Understanding European unemployment with matching and search-island models," Journal of Monetary Economics, Elsevier, vol. 54(8), pages 2139-2179, November.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Etienne Lalé, 2018. "Turbulence and the employment experience of older workers," Quantitative Economics, Econometric Society, vol. 9(2), pages 735-784, July.
    2. Jun Nie, 2010. "Training or search? evidence and an equilibrium model," Research Working Paper RWP 10-03, Federal Reserve Bank of Kansas City.
    3. Ortego-Marti, Victor, 2017. "Loss of skill during unemployment and TFP differences across countries," European Economic Review, Elsevier, vol. 100(C), pages 215-235.
    4. Chéron, Arnaud & Terriau, Anthony, 2018. "Life cycle training and equilibrium unemployment," Labour Economics, Elsevier, vol. 50(C), pages 32-44.
    5. Krause, Michael U. & Uhlig, Harald, 2012. "Transitions in the German labor market: Structure and crisis," Journal of Monetary Economics, Elsevier, vol. 59(1), pages 64-79.
    6. Rogerson, Richard & Shimer, Robert, 2011. "Search in Macroeconomic Models of the Labor Market," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 4, chapter 7, pages Pages: 61, Elsevier.
    7. Francisco Perez‐Arce & María J. Prados, 2021. "The Decline In The U.S. Labor Force Participation Rate: A Literature Review," Journal of Economic Surveys, Wiley Blackwell, vol. 35(2), pages 615-652, April.
    8. Cavalcanti, Tiago & Corrêa, Márcio, 2010. "Cash Transfers and the Labor Market," Revista Brasileira de Economia - RBE, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil), vol. 64(2), June.
    9. Wolcott, Erin L., 2021. "Employment inequality: Why do the low-skilled work less now?," Journal of Monetary Economics, Elsevier, vol. 118(C), pages 161-177.
    10. Belan, Pascal & Chéron, Arnaud, 2014. "Turbulence, training and unemployment," Labour Economics, Elsevier, vol. 27(C), pages 16-29.
    11. Ortego-Marti, Victor, 2016. "Unemployment history and frictional wage dispersion," Journal of Monetary Economics, Elsevier, vol. 78(C), pages 5-22.
    12. Arnaud Cheron & Anthony Terriau, 2015. "Search frictions and (in)efficient vocational training over the life-cycle," Working Papers hal-01292113, HAL.
    13. Tiago Cavalcanti & Márcio Corrêa, 2014. "Cash Transfers to the Poor and the Labor Market: An Equilibrium Analysis," Review of Development Economics, Wiley Blackwell, vol. 18(4), pages 741-762, November.
    14. Keller, Wolfgang & Utar, Hale, 2023. "International trade and job polarization: Evidence at the worker level," Journal of International Economics, Elsevier, vol. 145(C).
    15. Nicola Pavoni & G. L. Violante, 2007. "Optimal Welfare-to-Work Programs," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 74(1), pages 283-318.
    16. Mathan Satchi & Jonathan Temple, 2006. "Growth and labour markets in developing countries," Bristol Economics Discussion Papers 06/581, School of Economics, University of Bristol, UK.
    17. Isaac Baley & Lars Ljunqvist & Thomas Sargent, 2023. "Cross-Phenomenon Restrictions: Unemployment Effects of Layoff Costs and Quit Turbulence," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 50, pages 43-60, October.
    18. Echavarría-Soto, Juan José & López, Enrique & Ocampo, Sergio & Rodríguez-Niño, Norberto, 2012. "Choques, instituciones laborales y desempleo en Colombia," Chapters, in: Arango-Thomas, Luis Eduardo & Hamann-Salcedo, Franz Alonso (ed.), El mercado de trabajo en Colombia : hechos, tendencias e instituciones, chapter 18, pages 753-794, Banco de la Republica de Colombia.
    19. Richard B. Freeman, 2007. "Labor Market Institutions Around the World," NBER Working Papers 13242, National Bureau of Economic Research, Inc.
    20. Christian Dippel & Robert Gold & Stephan Heblich & Rodrigo Pinto, 2017. "Instrumental Variables and Causal Mechanisms: Unpacking the Effect of Trade on Workers and Voters," CESifo Working Paper Series 6816, CESifo.

    More about this item

    Keywords

    participation in the labor market; turbulence; Labor market frictions; human capital;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bge:wpaper:1347. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Bruno Guallar (email available below). General contact details of provider: https://edirc.repec.org/data/bargses.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.