Qualification-Mismatch and Long-Term Unemployment in a Growth-Matching Model

----Belgium —*—Ireland ......Italy                     ----Germany —*—France ......UK

---USA —*— Sweden .........Canada

Figure 1: Development of Long-Term Unemployment on Total Unemployment for
Groups of Countries.

levels of capital intensities is evaluated in a growth-matching-model with a heteroge-
neous unemployment pool, consisting of short-term and long-term unemployed, and
with endogenously determined skill-depreciation of the long-term jobless workers.
It will be shown that, due to a capitalization effect and a qualification-mismatch
effect, increasing technological progress has adverse implications on long-term un-
employment in innovation economies which are characterized by high steady-state
levels of capital intensities. Furthermore, for imitation economies with low steady-
state capital intensities technological progress can be favorable or unfavorable for
long-term unemployment depending on whether the creative destruction effect or
the capitalization effect dominates.

Before the model is developed in section 3, a short review of the literature dis-
cussing the relationship between technical progress and unemployment is given in
the following section. Section 4 analyses the steady-state solution and the stability
of the model and, thereafter, economic implications are shown in section 5. Section
6 concludes the discussion.

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