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Mismatch Cycles

Author

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  • Isaac Baley
  • Ana Figueiredo
  • Robert Ulbricht

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 because of information frictions and is prolonged by search frictions. Estimated to the United States, 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.

Suggested Citation

  • Isaac Baley & Ana Figueiredo & Robert Ulbricht, 2022. "Mismatch Cycles," Journal of Political Economy, University of Chicago Press, vol. 130(11), pages 2943-2984.
    • Handle: RePEc:ucp:jpolec:doi:10.1086/720461
    DOI: 10.1086/720461
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    Cited by:

    1. Isaac Baley & Laura Veldkamp, 2021. "Bayesian learning," Economics Working Papers 1797, Department of Economics and Business, Universitat Pompeu Fabra.
    2. Giorgio Brunello & Patricia Wruuck, 2021. "Skill shortages and skill mismatch: A review of the literature," Journal of Economic Surveys, Wiley Blackwell, vol. 35(4), pages 1145-1167, September.

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    More about this item

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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