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Mismatch as choice

Author

Listed:
  • Yu (Sonja) Chen

    (University of Calgary)

  • Matthew Doyle
  • Francisco M. Gonzalez

Abstract

We characterize a competitive search equilibrium in which firms in some markets create jobs that workers seek even though those jobs do not make the most productive use of workers' skills. We refer to markets in which workers purposefully search for and accept inferior jobs as exhibiting directed mismatch. This kind of misallocation is driven by the fact that incomplete information about workers' outside options implies that the value of on-the-job search is higher for workers employed in those inferior jobs. Our theory provides new insights into the returns to education as well as the impact of on-the-job search on labor market mismatch. It also suggests that the declining fortunes of college educated American workers in recent decades, like those of high school graduates, are linked to the automation and o¤shoring of routine-task based jobs.

Suggested Citation

  • Yu (Sonja) Chen & Matthew Doyle & Francisco M. Gonzalez, "undated". "Mismatch as choice," Working Papers 2017-04, Department of Economics, University of Calgary, revised 15 May 2017.
  • Handle: RePEc:clg:wpaper:2017-04
    as

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    Other versions of this item:

    • Francisco M. Gonzalez & Yu Chen & Matthew Doyle, 2017. "Mismatch As Choice," Working Papers 1702, University of Waterloo, Department of Economics, revised May 2017.

    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    directed search; information; adverse selection; mismatch;

    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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