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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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    1. Greg Kaplan & Sam Schulhofer-Wohl, 2012. "Interstate Migration Has Fallen Less Than You Think: Consequences of Hot Deck Imputation in the Current Population Survey," Demography, Springer;Population Association of America (PAA), vol. 49(3), pages 1061-1074, August.
    2. Warren E. Weber, 2005. "Were U.S. State Banknotes Priced as Securities?," 2005 Meeting Papers 306, Society for Economic Dynamics.
    3. Schulhofer-Wohl, Sam, 2012. "Negative equity does not reduce homeowners’ mobility," Quarterly Review, Federal Reserve Bank of Minneapolis, pages 1-17.
    4. Ricardo Lagos, 2006. "A Model of TFP," Review of Economic Studies, Oxford University Press, vol. 73(4), pages 983-1007.
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    Cited by:

    1. Galenianos, Manolis, 2014. "Hiring through referrals," Journal of Economic Theory, Elsevier, vol. 152(C), pages 304-323.

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