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

The continuing deterioration of the position of low skilled workers in thebeginning of the 90's in essentially all industrialized countries is one of the most debated issues in both labor and macro-economics. In this paper a matching model with low and high skilled workers and simple and complex jobs is presented. 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. Under certain conditions low skilled workers can even benefit from job competition by high skilled workers.