Spanish Unemployment Persistence and the Ladder Effect

Abstract

This paper aims to examine to what extent a "ladder" e.ect may contribute to explain changes in unemployment in Spain. The "ladder" e.ect arises when highly-skilled workers who do not find a job that matches their skills, accept jobs that were previously occupied by less qualified staff. We develop a dynamic general equilibrium model. The model is then calibrated for the Spanish economy. Our results replicate the observed decline in the ratio of high to low-skilled vacancies, and explain how firms substitute high for low-skilled employment. These results also suggest that in the Spanish case, ladder e.ect can be better explained by increases in training costs interpreted as a biased-shock against low-skilled workers.Matching models, low-skilled unemployment, mismatch