Unemployment and Search Externalities in a Model with Heterogeneous Jobs and Workers

This paper presents a matching model with low- and high-skilled workers and simple and complex jobs. I show that the degree to which low-skilled workers are harmed by high-skilled workers who are willing to temporarily accept simple jobs depends on the relative productivity of high- and low-skilled workers on simple jobs and on the quit rate of high-skilled workers. Under certain conditions, low-skilled workers can benefit from job competition with high-skilled workers. Within this framework, some explanations for the high and persistent unemployment rates of lower educated workers in the 1990s are evaluated