Unemployment, wage rigidity, and the returns to education

Gilles Saint-Paul

Research output: Contribution to journalArticle

Abstract

If real wage formation is rigid then an increase in the proportion of skilled workers in the economy may increase the relative unemployment rate of the unskilled, thus rendering them 'obsolete' or 'unemployable'. This in turn may generate increasing returns to education and multiple equilibria. A human intensive equilibrium may coexist with a physical capital intensive equilibrium. The ranking of equilibria with respect to welfare and unemployment is a priori ambiguous.

Original languageEnglish (US)
Pages (from-to)535-543
Number of pages9
JournalEuropean Economic Review
Volume38
Issue number3-4
DOIs
StatePublished - Apr 1994

Keywords

  • Human capital
  • Unemployment
  • Wage formation

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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