Mismatch in the Labor Market: Evidence from the U.K. and the U.S.

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IZA Seminar

Place: Schaumburg-Lippe-Str. 9, 53113 Bonn

Date: 15.03.2011, 12:15 - 13:30


Presentation by 

Giorgio Topa (Federal Reserve Bank of New York)


This paper provides a simple approach to measure mismatch in the labor market. We measure mismatchby comparing the observed allocation of unemployment and vacancies across sectors to theoptimal allocation chosen by a planner who can freely move labor across sectors. We show that, ina rich dynamic stochastic economic environment, the planner’s optimal allocation is dictated by a“generalized Jackman-Roper (JR) condition” where (productive and matching) efficiency-weightedvacancy-unemployment ratios should be equated across sectors. We then use this condition to developmismatch indexes that allow us to quantify how much of the recent rise in unemployment isassociated to an increase in mismatch. We apply our analysis to the U.K. and the U.S. labor markets.

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