Working Paper: CEPR ID: DP16423
Authors: Isaac Baley; Ana Figueiredo; Robert Ulbricht
Abstract: This paper studies the cyclical dynamics of skill mismatch and quantifies its impacton labor productivity. We build a tractable directed search model, in which workersdiffer in skills along multiple dimensions and sort into jobs with heterogeneous skillrequirements. Skill mismatch arises due to information frictions and is prolonged bysearch frictions. Estimated to the U.S., the model replicates salient business cycleproperties of mismatch. Job transitions in and out of bottom job rungs, combined withcareer mobility, are key to account for the empirical fit. The model provides a novelnarrative for the scarring effect of unemployment.
Keywords: business cycles; cleansing; learning about skills; multidimensional sorting; scarring effect of unemployment; search-and-matching; skill mismatch; sullying
JEL Codes: E24; E32; J24; J64
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Underqualified workers are more likely to be fired (J63) | Reduced overall mismatch among ongoing work relationships (J29) |
| Reduced overall mismatch among ongoing work relationships (J29) | Increased labor productivity among continuously employed workers (J29) |
| Mismatch among new hires increases (J63) | Reduced labor productivity of new hires (J24) |
| Business cycles influence job transitions and career mobility dynamics (J62) | Increased mismatch among new hires (J79) |
| Workers displaced from their careers suffer persistent earnings losses (J68) | Scarring effect of unemployment (J65) |
| Career mobility is countercyclical (J62) | Increased mismatch among new hires (J79) |
| Transitions within career paths reduce mismatch (J62) | Reduced mismatch (C52) |