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Demographics and Sectoral Reallocations: A Search Theory with Immobile Workers

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  • Simona Cociuba

    (University of Western Ontario)

  • James MacGee

    (University of Western Ontario)

Abstract

We show that a decline in the young share of the population exacerbates sectoral reallocation costs. We develop a three sector, perpetual youth search model with sector-specific human capital and two interconnected frictions: sectoral preferences, which imply that only some workers are mobile across sectors, and a wage bargaining distortion, whereby mobile workers’ outside option of searching in the growing sector dampens the fall in shrinking sector wages, leading to rest unemployment. In our parameterized model, output losses after a sectoral reallocation are significant.

Suggested Citation

  • Simona Cociuba & James MacGee, 2019. "Demographics and Sectoral Reallocations: A Search Theory with Immobile Workers," 2019 Meeting Papers 920, Society for Economic Dynamics.
    • Handle: RePEc:red:sed019:920
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    Cited by:

    1. KIKUCHI Shinnosuke & KITAO Sagiri, 2020. "Welfare Effects of Polarization: Occupational Mobility over the Life-cycle," Discussion papers 20043, Research Institute of Economy, Trade and Industry (RIETI).

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