A MATCHING MODEL OF CROWDING-OUT AND ON-THE- JOB SEARCH (WITH AN APPLICATION TO SPAIN)

This paper considers a matching model of heterogenous and jobs which includes on-the-job search. High-educated workers transitorily accept unskilled jobs and continue to search for skilled jobs. We study the implications of this model for the unemployment rates of high and low-educated workers, for the share of mismatched workers and wage nequality both within and between skill groups. The model is used to shed light on the Spanish experience following a large educational upgrading since the mid-eighties.