Many college graduates are underemployed, i.e., work in occupations that do not require a college degree. We document that underemployed workers are less likely to transition to a college occupation the longer they are underemployed and that longer underemployment histories are associated with lower wages in college occupations. To explain these findings, we develop a directed search model with unobserved heterogeneity, occupation-specific human capital, and on the job search. Workers are uncertain about their suitability for college jobs and learn through search. Underemployment is generated by search and information frictions, as workers with a low expected job-finding probability in college occupations self-select into underemployment. Once underemployed, workers’ college occupation-specific human capital decays. A quantitative decomposition shows that unobserved heterogeneity explains most of the duration dependence in underemployment, and that information frictions play a significant role in both the existence of underemployment and the resulting duration dependence.
Presented at: 2023 OzMac Workshop, 2023 AMES Beijing, 2023 AMES Singapore, 2023 ESAM Sydney, 2022 AMES Tokyo, Curtin University*, Monash University*, National University of Singapore*, University of Aberdeen*, UC Irvine*, University of Melbourne*, 2022 Spring Midwestern Macroeconomics Meeting*, 2022 AMES China*, 2022 Australasia Econometric Society Meeting*, 2023 Midwest Macroeconomics Meetings*, Inaugural Search and Matching Pacific in Asia-Pacific*, the 2nd Australasian Search and Matching Workshop*.

Extensive research has studied the effect of the Internet on trade, yet little is known about its role in trade facilitation through risk alleviation. This research investigates the facilitation of Internet linkage on export, particularly through the novel channel of risk alleviation. Theoretically, this paper introduces a gravity model augmented with export risk to establish the stimulus of Internet linkage on exports. Empirically, this paper uses inter-domain hyperlinks as a proxy for Internet linkage in 2009, uncovering a statistically significant positive impact of Internet linkage on exports. Notably, there is a 27.8% increase in exports in reaction to a doubling of the Internet linkage intensity. By employing various techniques, we meticulously address potential endogeneity issues and substantiate the risk-alleviation mechanism at both the country and product levels. Particularly, we find that exports to riskier countries and of riskier products benefit more from the Internet linkage. This study sheds new light on the novel channel through which the Internet promotes exports, enriching the existing literature in this field.


Presented at: NUS Macro Brownbag

Presented at: NUS Macro Brownbag*, PHBS*, Monash Macro and Money Workshop*

Note: * presented by a co-author.