S-WoPEc
 
Scandinavian Working Papers in Economics
HomeAboutSeriesSubject/JEL codesAdvanced Search
Department of Economics, Stockholm University Research Papers in Economics, Department of Economics, Stockholm University

No 2002:14:
Capital-Skill Complementarity and Inequality Over the Business Cycle

Matthew J. Lindquist ()

Abstract: This study investigates the implications of capital-skill complementarity

for the cyclical behavior of wage inequality. This is done in a dynamic general equilibrium model which extends the standard real business cycle model in three ways. First, the representative agent is replaced by two agent types, skilled and unskilled. Second, the standard, two-factor Cobb-Douglas production function is replaced by a more general, four-factor production function which allows for capital-skill complementarity. Third, the model includes both neutral and investment-specific technological change. The model successfully accounts for both the volatility and the cyclical behavior of the skill premium in the United States. The results of this study suggest that capital-skill complementarity may be an important determinant of wage inequality over the business cycle.

Keywords: business cycle; capital-skill complementarity; inequality; skill premium; (follow links to similar papers)

JEL-Codes: J31; (follow links to similar papers)

33 pages, July 16, 2002, Revised September 1, 2003

Download Statistics


This paper is published as:
Lindquist, Matthew J., (2004), 'Capital-Skill Complementarity and Inequality Over the Business Cycle', Review of Economic Dynamics, Vol. 7, July, No. 3, pages 519-540



Questions (including download problems) about the papers in this series should be directed to Sten Nyberg ()
Report other problems with accessing this service to Sune Karlsson () or Helena Lundin ().

Programing by
Design by Joachim Ekebom

Handle: RePEc:hhs:sunrpe:2002_0014 This page was generated on 2016-11-07 22:04:13