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Skill shortages, labor reallocation, and growth

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  • Hetze, Pascal

Abstract

This paper explores the relationship between growth and unemployment. Knowledge formation is the source of growth, which includes the two dimensions technologies and skills. Both are connected through a technology-skill complementarity which may have limiting effects on the reallocation of labor and technology implementation in manufacturing. The reallocation of labor becomes necessary as growth leads to continuous job creation and job destruction. The ratio of job destruction to job creation identifies three regimes, two of which are associated with unemployment either due to restricted labor demand or due to skill shortages. While in the regime with full employment the model confirms the standard result that knowledge formation has positive effects on growth, the outcome is much more ambiguous if we consider a possible technology-skill mismatch and unemployment.

Suggested Citation

  • Hetze, Pascal, 2006. "Skill shortages, labor reallocation, and growth," Thuenen-Series of Applied Economic Theory 59, University of Rostock, Institute of Economics.
    • Handle: RePEc:zbw:roswps:59
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    More about this item

    Keywords

    endogenous growth; knowledge formation; unemployment; skill mismatch;
    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
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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