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Frictions And Mismatches In The Labor Market

Author

Listed:
  • BURHAN BINER

    (Department of Economics, DePaul University, 1 East Jackson Boulevard, Suite 6200, Chicago, IL 60604, USA)

  • TURKMEN GOKSEL

    (Department of Economics, Faculty of Political Sciences, Ankara University, Cemal Gursel Ave, Cebeci, Ankara 06590, Turkey)

Abstract
We develop an infinite-horizon dynamic search model to understand education–job mismatches in the labor markets where job seekers face three different types of labor markets based on their minimum educational requirements. Using a new dataset, we find that our model matches the US data well when we introduce heterogeneity through wage distributions. We use counterfactual experiments to show that even when the general unemployment level is kept constant, if the conditions within different job market types change, overeducation levels may increase or decrease dramatically. We find that regardless of the general unemployment level, frictions in the job market is the main reason for overeducation. However when unemployment is high, highly educated job seekers may settle for jobs below their education level at a higher level leading to a high degree of overeducation in the labor market and crowding out job seekers who have lower level of education.

Suggested Citation

  • Burhan Biner & Turkmen Goksel, 2023. "Frictions And Mismatches In The Labor Market," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 68(03), pages 685-701, June.
    • Handle: RePEc:wsi:serxxx:v:68:y:2023:i:03:n:s0217590819500504
    DOI: 10.1142/S0217590819500504
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    More about this item

    Keywords

    Dynamic search; mismatch; overeducation; Monte Carlo Simulation;
    All these keywords.

    JEL classification:

    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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