DP4094 On-the-Job Search in a Matching Model with Heterogeneous Jobs and Workers

Author(s): Juan J. Dolado, Marcel Jansen, Juan F Jimeno
Publication Date: October 2003
Keyword(s): job search, skills, unemployment, wage inequality
JEL(s): J63, J64
Programme Areas: Labour Economics
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=4094

This paper considers a matching model with heterogeneous jobs (unskilled and skilled) and workers (low- and high-educated) which allows for on-the-job search by mismatched workers. The latter are high-educated workers who transitorily accept unskilled jobs and continue to search for skilled jobs. Our findings show that on-the-job search introduces an additional source of between- and within-group wage inequality. Furthermore, the higher quit rate of mismatched workers exerts a negative externality on unskilled jobs and weakens the labour market position of low-educated workers. This last feature changes the effects of skill-biased technological change and it alters the response of the labour market to shifts in the skill distribution.