Department of Economics and Business - Universitat Pompeu Fabra

Title:: Mismatch cycles
Authors:: Isaac Baley, Ana Figueiredo and Robert Ulbricht
Date:: January 2020 (Revised: August 2021)
Abstract:: This paper studies the cyclical dynamics of skill mismatch and quantifies its impact on labor productivity. We build a tractable directed search model, in which workers differ in skills along multiple dimensions and sort into jobs with heterogeneous skill requirements. Skill mismatch arises due to information frictions and is prolonged by search frictions. Estimated to the U.S., the model replicates salient business cycle properties of mismatch. Job transitions in and out of bottom job rungs, combined with career mobility, are key to account for the empirical fit. The model provides a novel narrative 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.
Area of Research:: Macroeconomics and International Economics
Published in:: Journal of Political Economy, forthcoming

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