Wage Cyclicality and Labor Market Sorting

This paper uses a measure of skill mismatch to separate wage flexibility from confounding variation in wages driven by differences in job quality over the business cycle. I first show that the high cyclicality of job switchers wages goes beyond cyclical movements in skill mismatch. Then, I uncover large differences in wage cyclicality across the skill mismatch distribution. Among incumbent workers, wages are acyclical in good matches but procyclical in poor matches, in particular for overqualified workers.