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Underemployment and the Trickle-Down of Unemployment

Author

Listed:
  • Regis Barnichon
  • Yanos Zylberberg

Abstract

A 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.

Suggested Citation

  • Regis Barnichon & Yanos Zylberberg, 2019. "Underemployment and the Trickle-Down of Unemployment," American Economic Journal: Macroeconomics, American Economic Association, vol. 11(2), pages 40-78, April.
    • Handle: RePEc:aea:aejmac:v:11:y:2019:i:2:p:40-78
    Note: DOI: 10.1257/mac.20160220
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    Citations

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    Cited by:

    1. Garibaldi, Pietro & Gomes, Pedro Maia & Sopraseuth, Thepthida, 2020. "Output Costs of Education and Skill Mismatch," IZA Discussion Papers 12974, Institute of Labor Economics (IZA).
    2. Konstantinos Mavrigiannakis & Andreas Vasilatos & Eugenia Vella, 2023. "Fiscal Tightening and Skills Mismatch," DEOS Working Papers 2313, Athens University of Economics and Business.
    3. Albanesi, Stefania & Gihleb, Rania & Zhang, Ning, 2022. "Boomerang College Kids: Unemployment, Job Mismatch and Coresidence," IZA Discussion Papers 15507, Institute of Labor Economics (IZA).
    4. Gulyas, Andreas & Meier, Matthias & Ryzhenkov, Mykola, 2024. "Labor market effects of monetary policy across workers and firms," European Economic Review, Elsevier, vol. 166(C).
    5. Jackson, Paul, 2023. "Equilibrium underemployment," Labour Economics, Elsevier, vol. 81(C).
    6. Nakamura, Hideki, 2023. "Difficulties in finding middle-skilled jobs under increased automation," Macroeconomic Dynamics, Cambridge University Press, vol. 27(5), pages 1179-1201, July.
    7. Lorenzo Navarini & Dieter Verhaest, 2024. "Returns to Education and Overeducation Risk: A Dynamic Model," Working Papers of Department of Economics, Leuven 745260, KU Leuven, Faculty of Economics and Business (FEB), Department of Economics, Leuven.
    8. Nan Li & Huanhuan Liang & Yi Gao & Dan Wu, 2022. "Short- and Long-Term Effects of Underemployment on Workers’ Health: Empirical Analysis from the China Labor Force Dynamics Survey," IJERPH, MDPI, vol. 19(24), pages 1-14, December.
    9. Garibaldi, Pietro & Gomes, Pedro & Sopraseuth, Thepthida, 2021. "Public employment redux," Journal of Government and Economics, Elsevier, vol. 1(C).
    10. Daniel Francois Meyer & Precious Mncayi, 2021. "An Analysis of Underemployment among Young Graduates: The Case of a Higher Education Institution in South Africa," Economies, MDPI, vol. 9(4), pages 1-16, December.
    11. Julian Costas-Fernandez & Simon Lodato, 2023. "Distributional effects of immigration and imperfect labour markets," RF Berlin - CReAM Discussion Paper Series 2301, Rockwool Foundation Berlin (RF Berlin) - Centre for Research and Analysis of Migration (CReAM).
    12. George Liontos & Konstantinos Mavrigiannakis & Eugenia Vella, 2023. "The Macroeconomics of Skills Mismatch in the Presence of Emigration," DEOS Working Papers 2314, Athens University of Economics and Business.
    13. Domnisoru, Ciprian, 2023. "The G.I. Bill and Underemployment," IZA Discussion Papers 16444, Institute of Labor Economics (IZA).
    14. Bradley, Jake, 2022. "Worker-Firm Screening and the Business Cycle," IZA Discussion Papers 15017, Institute of Labor Economics (IZA).
    15. Diego Linthon-Delgado & Lizethe Méndez-Heras & Francisco Venegas-Martínez, 2024. "Microeconomic Determinants of Underemployment and Unemployment in Ecuador 2019–2022," International Journal of Economics and Financial Issues, Econjournals, vol. 14(6), pages 153-163, October.
    16. Yu Chen, 2022. "A Directed Search Model of Crowding Out," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 43, pages 308-340, January.

    More about this item

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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