Crude substitution: The cyclical dynamics of oil prices and the skill premium
At the business cycle frequency, energy prices and the skill premium display a strong, negative correlation. This fact is robust to different de-trending procedures. Identifying exogenous shocks to oil prices using the Hoover-Perez [1994. Post hoc ergo propter once more: an evaluation of [`]Does monetary policy matter?' in the spirit of James Tobin. Journal of Monetary Econonmics 34, 47-73] dates, shows that the skill premium falls in response to such a shock. The estimation of the parameters of an aggregate technology that uses, among other inputs, energy and heterogeneous skills, demonstrates that capital-skill and capital-energy complementarity are responsible for this correlation. As energy prices rise, the use of capital decreases and the demand for unskilled labor--relative to skilled labor--increases, lowering the skill premium.
Year of publication: |
2009
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Authors: | Polgreen, Linnea ; Silos, Pedro |
Published in: |
Journal of Monetary Economics. - Elsevier, ISSN 0304-3932. - Vol. 56.2009, 3, p. 409-418
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Publisher: |
Elsevier |
Keywords: | Skill heterogeneity Energy prices Business cycles Capital-skill complementarity |
Saved in:
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