Cyclical Upgrading of Labor and Employment Differences across Skill Groups
This paper examines the cyclical properties of employment rates in a search and matching model that features heterogeneous workers and jobs. I capture heterogeneity by postulating two skill levels: high and low. All low-skill workers can produce in only low-skill jobs, whereas some high-skill workers can produce in both high-and low-skill jobs. My analysis highlights the importance of a vertical type of transitory skill mismatch, in which workers accept jobs below their skill level to escape unemployment and upgrade by on-the-job search, in explaining why employment is typically lower and more procyclical at lower skill levels. The model is also consistent with other important features of the labor market, such as a procyclical rate of job-to-job transitions and evidence on cyclical changes in the composition of job quality. In recessions outflows from unemployment shift the distribution of high-skill workers toward low-skill jobs, while expansions allow them to upgrade to high-skill jobs through job-to-job transitions.
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Volume (Year): 11 (2011)
Issue (Month): 1 (May)
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- van Ours, Jan & Ridder, Geert, 1992. "Vacancies and the Recruitment of New Employees," Journal of Labor Economics, University of Chicago Press, vol. 10(2), pages 138-55, April.
- van Ours, J. C. & Ridder, G., 1995. "Job matching and job competition: Are lower educated workers at the back of job queues?," European Economic Review, Elsevier, vol. 39(9), pages 1717-1731, December.
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