Journal Article

Excess Worker Reallocation

Giuseppe Moscarini

in The Review of Economic Studies

Published on behalf of Review of Economic Studies Ltd

Volume 68, issue 3, pages 593-612
Published in print July 2001 | ISSN: 0034-6527
Published online July 2001 | e-ISSN: 1467-937X | DOI: http://dx.doi.org/10.1111/1467-937X.00182
Excess Worker Reallocation

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Workers face a trade-off between macroeconomic and individual incentives to work in different occupations/industries; namely, between search frictions and personal comparative advantages. Workers endowed with heterogeneous multi-dimensional skills search for jobs that require different skill combinations. In equilibrium, specialized individuals contact few, selected types of vacancies, where they are likely to be hired; those with weak comparative advantages are seldom chosen among competing applicants, thus seek any job type. In a tight labour market, comparative advantages dominate waiting costs: offsetting labour mobility across industries/occupations—Excess Worker Reallocation—is lower and matches are more successful, consistently with direct and indirect evidence.

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Subjects: Economics

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