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Measuring Mismatch in the US Labor Market

Author

Listed:
  • Joseph Song

    (Columbia University)

  • Giorgio Topa

    (Federal Reserve Bank of New York)

  • Gianluca Violante

    (NYU)

  • Aysegul Sahin

    (Federal Reserve Bank of New York)

Abstract

This paper measures mismatch between job-seekers and vacancies in the U.S. labor market. Mismatch is defined as the distance between the observed allocation of unemployed workers across sectors and the optimal allocation that solves a planner’s problem. The planner’s allocation rule requires (productive and matching) efficiency-weighted vacancy-unemployment ratios to be equated across sectors. More severe mismatch between vacant jobs and idle workers translates into higher unemployment by reducing the aggregate job-finding rate. In our empirical analysis, we use two sources of cross-sectional data on vacancies, JOLTS and HWOL, together with unemployment data from the CPS. We find that mismatch across industries and occupations accounts for 0.6 to 1.7 percentage points of the recent rise (by about five percentage points) in the U.S. unemployment rate, whereas geographical mismatch plays no role. The share of the rise in unemployment explained by mismatch is increasing in the education level.

Suggested Citation

  • Joseph Song & Giorgio Topa & Gianluca Violante & Aysegul Sahin, 2012. "Measuring Mismatch in the US Labor Market," 2012 Meeting Papers 973, Society for Economic Dynamics.
    • Handle: RePEc:red:sed012:973
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    References listed on IDEAS

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    Cited by:

    1. Luca Sala & Ulf Söderström & Antonella Trigari, 2013. "Structural and Cyclical Forces in the Labor Market during the Great Recession: Cross-Country Evidence," NBER International Seminar on Macroeconomics, University of Chicago Press, vol. 9(1), pages 345-404.
    2. Jesse Rothstein, 2012. "The Labor Market Four Years into the Crisis: Assessing Structural Explanations," ILR Review, Cornell University, ILR School, vol. 65(3), pages 467-500, July.
    3. Galenianos, Manolis, 2014. "Hiring through referrals," Journal of Economic Theory, Elsevier, vol. 152(C), pages 304-323.
    4. Jose Mustre-del-Rio & William Hawkins, 2012. "Financial Frictions and Occupational Mobility," 2012 Meeting Papers 1123, Society for Economic Dynamics.
    5. Kyle F. Herkenhoff & Lee E. Ohanian, 2012. "Foreclosure delay and U.S. unemployment," Working Papers 2012-017, Federal Reserve Bank of St. Louis.
    6. Lasitha R.C. Pathberiya, 2018. "Jobless Recovery, Liquidity Trap, Tight Monetary Policy and the Cost Channel," Discussion Papers Series 591, School of Economics, University of Queensland, Australia.

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