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Mismatch cycles

Isaac Baley (), Ana Figueiredo and Robert Ulbricht

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

Abstract: This paper studies the dynamics of skill mismatch over the business cycle. We build a tractable directed search model, in which workers differ in skills along multiple dimensions and sort into jobs with heterogeneous skill requirements along those dimensions. Skill mismatch arises due to information and labor market frictions. Estimated to the U.S., the model replicates salient business cyclic properties of mismatch. We show that job transitions in and out of bottom job rungs, combined with career mobility of workers, are important to account for the empirical behavior of mismatch. The predicted career dynamics provide a novel narrative for the scarring effect of unemployment. The model suggests significant welfare costs associated with mismatch due to learning frictions.

Keywords: Business cycles; cleansing; learning about skills; multidimensional sorting; scarring effect of unemployment; search-and-matching; skill mismatch; sullying. (search for similar items in EconPapers)
JEL-codes: E24 E32 J24 J64 (search for similar items in EconPapers)
Date: 2020-01
New Economics Papers: this item is included in nep-dge, nep-lab, nep-mac and nep-ure
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Related works:
Working Paper: Mismatch Cycles (2020) Downloads
Working Paper: Mismatch Cycles (2019) Downloads
Working Paper: Mismatch Cycles (2018) Downloads
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