A Matching Model of Crowding-Out and On-the-Job Search (with an Application to Spain)

This Paper considers a matching model of heterogeneous workers 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 inequality 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.