Abstract

We document that poorer workers are more mismatched with their jobs. We develop a model with two-sided heterogeneity, search frictions, and incomplete markets, in which precautionary motives lead poor workers to exit unemployment faster by accepting a wider range of jobs—precautionary mismatch. Calibrating the model to the US economy, we find that mismatch lowers aggregate labor productivity by about 3%, of which precautionary mismatch accounts for roughly one-fifth.