Precautionary Mismatch

Jincheng Huang and Xincheng Qiu ()
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Jincheng Huang: International Monetary Fund
Xincheng Qiu: Peking University

No 19085, IZA Discussion Papers from IZA Network @ LISER

Abstract: We document that poorer workers are more mismatched with their jobs. We develop a model with two-sided heterogeneity, search frictions, and incomplete markets, in which precautionary motives lead poor workers to exit unemployment faster by accepting a wider range of jobs—precautionary mismatch. Calibrating the model to the US economy, we find that mismatch lowers aggregate labor productivity by about 3%, of which precautionary mismatch accounts for roughly one-fifth.

Keywords: sorting; mismatch; incomplete markets; search and matching (search for similar items in EconPapers)
JEL-codes: D31 E21 J64 (search for similar items in EconPapers)
Date: 2026-11
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