Mismatch Cycles  joint with Ana Figueiredo and Robert Ulbricht

Abstract:

We document new facts about the cyclicality of worker–occupation mismatch in the US. In downturns, under-qualified workers are more likely to lose their jobs, consistent with the cleansing effect of recessions. New hires from unemployment, by contrast, are more mismatched in recessions, and this holds true for over- and under-qualification. To account for the facts, we build a directed search model, with on-the-job learning about worker skills. Skills are multidimensional and workers select into careers (tasks) based on what they believe to be their comparative advantages. In the model, the increase in the mismatch of new hires is a direct consequence of the cleansing. This is because workers subject to cleansing have high propensities to switch careers, and due to the learning, this leads to high uncertainty and mismatch.