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Measuring Mismatch in the US Labor Market

  • Joseph Song

    (Columbia University)

  • Giorgio Topa

    (Federal Reserve Bank of New York)

  • Gianluca Violante

    (NYU)

  • Aysegul Sahin

    (Federal Reserve Bank of New York)

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.

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Paper provided by Society for Economic Dynamics in its series 2012 Meeting Papers with number 973.

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Date of creation: 2012
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Handle: RePEc:red:sed012:973
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Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA

Web page: http://www.EconomicDynamics.org/
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  1. Ricardo Lagos, 2006. "A Model of TFP," Review of Economic Studies, Oxford University Press, vol. 73(4), pages 983-1007.
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