Employment Effects of Skill Biased Technological Change When Benefits are Linked to Per-Capita Income

MEA Discussion Paper No. 043-04

25 Pages Posted: 31 Jan 2009 Last revised: 30 Jun 2009

See all articles by Matthias Weiss

Matthias Weiss

MEA, Max Planck Institute for Social Law and Social Policy; Maastricht University - Research Centre for Education and the Labour Market (ROA)

Date Written: January 15, 2004

Abstract

This paper studies the employment effects of technological change when benefits are endogenous. If the (i) level of welfare aid depends on the general income level in the economy and (ii) wages for unskilled workers cannot fall below the level of welfare aid, there is a link between the wage for unskilled labor and the productivity of skilled labor. An increase in the latter will lead to an increase in average income and hence the level of welfare aid. This in turn leads unions to ask for higher wages for unskilled workers. Technological change is shown to have employment effects (only) if it is skill-biased and if this link exists.

Keywords: Unemployment, Skill-Biased Technical Change, Union Wage Setting

JEL Classification: E24, J31, J50, O30

Suggested Citation

Weiss, Matthias, Employment Effects of Skill Biased Technological Change When Benefits are Linked to Per-Capita Income (January 15, 2004). MEA Discussion Paper No. 043-04, Available at SSRN: https://ssrn.com/abstract=1335384 or http://dx.doi.org/10.2139/ssrn.1335384

Matthias Weiss (Contact Author)

MEA, Max Planck Institute for Social Law and Social Policy ( email )

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