The Employed, The Unemployed, And The Unemployable: Directed Search With Worker Heterogeneity

The authors examine the implications of worker heterogeneity on the equilibrium matching process, using a directed search model. Worker abilities are selected from a general distribution, subject to some weak regularity requirements, and the firms direct their job offers to workers. They identify conditions under which some fraction of the workforce will be "Unemployable": no firm will approach them even though they offer positive surplus. For large markets they derive a simple closed form expression for the equilibrum matching function.