Macroeconomic Uncertainty and Capital-Skill Complementarity

August 4, 2023

Preview Citation

Format: Chicago

Anna Belianska. Macroeconomic Uncertainty and Capital-Skill Complementarity, (USA: International Monetary Fund, 2023) accessed October 6, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

I examine the impact of macroeconomic uncertainty on labor market outcomes for skilled and unskilled workers and propose a new channel to improve our understanding of the underlying propagation mechanisms. I find that uncertainty shocks are recessionary with the unskilled experiencing a steeper fall in employment. To rationalize these findings, I build a New Keynesian DSGE model with skill heterogeneity and wage rigidities, which, coupled with precautionary labor supply, significantly amplify contractionary effects of uncertainty on the real economy.

Subject: Employment, Labor, Labor supply, Skilled labor, Wages

Keywords: A. Detrending method, A. solution method, Capital-skill complementarity, Employment, Europe, Labor supply, Relative wages, Skill premium., Skilled labor, Stochastic volatility, SVAR impulse response, SVAR methodology, Uncertainty shock, Wages

Publication Details

Pages:

74
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2023/155
Stock No:

WPIEA2023155
ISBN:

9798400250316
ISSN:

1018-5941

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