Underemployment and the Trickle-Down of Unemployment

Régis Barnichon and Yanos Zylberberg

American Economic Journal: Macroeconomics, 2019, vol. 11, issue 2, 40-78

Abstract: A substantial fraction of workers are underemployed, i.e., employed in jobs for which they are overqualified, and that fraction—the underemployment rate—is higher in recessions. To explain these facts, we build a search model with an endogenous "ranking" mechanism, in which high-skill applicants are systematically hired over less-skilled competing applicants. Some high-skill workers become underemployed in order to escape the competition for high-skill jobs and find a job more rapidly at the expense of less-skilled workers. Quantitatively, the model can capture the key characteristics of underemployment, notably the fact that both the underemployment rate and the wage loss associated with becoming underemployed increase in recessions.

JEL-codes: E24 E32 J24 J64 (search for similar items in EconPapers)
Date: 2019
Note: DOI: 10.1257/mac.20160220
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Citations: View citations in EconPapers (22)

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