On‐the‐Job Search in a Matching Model with Heterogeneous Jobs and Workers *

This article examines the effects of transitory skill mismatch in a matching model with heterogeneous jobs and workers. In our model, some highly‐educated workers may accept unskilled jobs for which they are over‐qualified but are allowed to engage in on‐the‐job search in pursuit of a better job. We show that this feature has relevant implications for the set of potential equilibria, the unemployment rates of the different types of workers, the degree of wage inequality, and the response of the labour market to shifts in the demand and supply of skills. An examination to select 175 postal workers for the region of Madrid yesterday gathered 15,570 candidates. Among them, 53% were college graduates (‘licenciados’ or ‘diplomados’) while the required educational attainment was upper‐secondary education (‘graduado escolar’) or an equivalent level of vocational training. ( EL PAÍS, 23rd March, 2002).