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Underemployment and the Trickle-Down of Unemployment†

Underemployment and the Trickle-Down of Unemployment† AbstractA substantial fraction of workers are underemployed, i.e., employed in jobs for which they are overqualified, and that fraction—the underemployment rate—is higher in recessions. To explain these facts, we build a search model with an endogenous “ranking” mechanism, in which high-skill applicants are systematically hired over less-skilled competing applicants. Some high-skill workers become underemployed in order to escape the competition for high-skill jobs and find a job more rapidly at the expense of less-skilled workers. Quantitatively, the model can capture the key characteristics of underemployment, notably the fact that both the underemployment rate and the wage loss associated with becoming underemployed increase in recessions. (JEL E24, E32, J24, J64) http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png American Economic Journal: Macroeconomics American Economic Association

Underemployment and the Trickle-Down of Unemployment†

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Publisher
American Economic Association
Copyright
Copyright © 2019 © American Economic Association
ISSN
1945-7715
DOI
10.1257/mac.20160220
Publisher site
See Article on Publisher Site

Abstract

AbstractA substantial fraction of workers are underemployed, i.e., employed in jobs for which they are overqualified, and that fraction—the underemployment rate—is higher in recessions. To explain these facts, we build a search model with an endogenous “ranking” mechanism, in which high-skill applicants are systematically hired over less-skilled competing applicants. Some high-skill workers become underemployed in order to escape the competition for high-skill jobs and find a job more rapidly at the expense of less-skilled workers. Quantitatively, the model can capture the key characteristics of underemployment, notably the fact that both the underemployment rate and the wage loss associated with becoming underemployed increase in recessions. (JEL E24, E32, J24, J64)

Journal

American Economic Journal: MacroeconomicsAmerican Economic Association

Published: Apr 1, 2019

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