Abstract
This paper studies the cyclical dynamics of skill mismatch and quantifies its impact on labor productivity. We build a tractable directed search model, in which workers differ in skills along multiple dimensions and sort into jobs with heterogeneous skill requirements. Skill mismatch arises because of information frictions and is prolonged by search frictions. Estimated to the United States, the model replicates salient business cycle properties of mismatch. Job transitions in and out of bottom job rungs, combined with career mobility, are key to account for the empirical fit. The model provides a novel narrative for the scarring effect of unemployment.
| Original language | English |
|---|---|
| Pages (from-to) | 2943–2984 |
| Number of pages | 42 |
| Journal | Journal of Political Economy |
| Volume | 130 |
| Issue number | 11 |
| DOIs | |
| Publication status | Published - 1 Nov 2022 |
Bibliographical note
Funding Information:We are grateful for helpful comments and suggestions from the editor and four anonymous referees as well as from Regis Barnichon, Anja Bauer, Pedro Gomes, Benjamin Griffy, Andreas R. Kostøl, Guido Menzio, and numerous seminar and conference audiences. This research has received funding from “La Caixa” Foundation Project Grant CG-2019-01: Worker Reallocation, Occupational Mismatch, and Business Cycles. This paper was edited by Greg Kaplan.
Publisher Copyright:
© 2022 The University of Chicago. All rights reserved. Published by The University of Chicago Press.
