Unemployment and Endogenous Growth with Capital-Skill Complementarity

Abstract

We construct an endogenous growth intertemporal general equilibrium model with two types of jobs and two types of workers. We allow for job competition between high- and low skilled workers on the low-skilled segment of the labor market and for on-the-job search for high skilled workers. Matching processes are represented by matching functions à la Pissarides. Workers search intensities are endogenous. We distinguish between embodied and disembodied technological progress and endogenize them through a learning by doing process based on capital accumulation. Social returns to capital are imposed to be constant. Biased technological change is introduced via embodied technical progress and new technologies-skill complementarity relationship. The model reproduces quite well the producivity slowdown puzzle, the unemployment rate evolutions and the relative wage stability observed over the last decades. It suggests strong interactions between embodied technological progress, biased technological change, discouragement effects on job competition.skill mismatch, equilibrium unemployment, ladder effect, macro dynamics, endogneous growth, productivity slowdown, learning by doing