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Efficient Mismatch

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Abstract

This paper presents a model in which mismatch employment arises in a constrained efficient equilibrium. In the decentralized economy, however, mismatch gives rise to a congestion externality whereby heterogeneous job seekers fail to internalize how their individual actions affect the labor market outcomes of competitors in a common unemployment pool. We provide an analytic characterization of this distortion, assess the distributional nature of the associated welfare effects, and relate it to the relative productivity of low- and high-skilled workers competing for similar jobs.

Suggested Citation

  • David M. Arseneau & Brendan Epstein, 2018. "Efficient Mismatch," Finance and Economics Discussion Series 2018-037, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgfe:2018-37
    DOI: 10.17016/FEDS.2018.037
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    References listed on IDEAS

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    1. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, December.
    2. repec:spo:wpmain:info:hdl:2441/2gm7u1h28o97arriihp43sr90l is not listed on IDEAS
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    6. David M. Arseneau & Brendan Epstein, 2014. "The Welfare Costs of Skill-Mismatch Employment," Finance and Economics Discussion Series 2014-42, Board of Governors of the Federal Reserve System (U.S.).
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    Cited by:

    1. Hassan Molana & Catia Montagna & George E. Onwordi, 2021. "De-Globalization, Welfare State Reforms and Labor Market Outcomes," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 69(4), pages 624-655, December.

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    Keywords

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    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
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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