Mismatch Cycles

Isaac Baley, Ana Gomes Figueiredo Varatojo dos Santos, Robert Ulbricht

Research output: Contribution to journalArticleAcademicpeer-review

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 due to information frictions and is prolonged by search frictions. Estimated to the U.S., 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 languageEnglish
JournalJournal of Political Economy
DOIs
Publication statusE-pub ahead of print - 1 Apr 2022

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