Work hour mismatches and on-the-job search

- This paper constructs an on-the-job search model with wage bargaining and mismatch.
- The worker type changes in accordance with a stochastic process.
- Although the workers' turnover decision is privately efficient, this decision may be socially inefficient.

This paper constructs an on-the-job search model with work hour mismatches. In this model, there are two types of jobs that differ in output per hour, and workers are also heterogeneous with respect to preferences for the working hours. This heterogeneity may generate mismatch between worker's preference and job's type. Because worker's preference is changed by exogenous shocks, workers can eliminate mismatch by two ways: (i) moving to a suitable job by a job-to-job transition and (ii) waiting to change their preference. Those ways are consistent with empirical findings (e.g., Euwal, 2001; Johnson, 2010; Reynolds and Aletraris, 2006). The model shows that job-to-job transitions are less frequent than its efficient level, and hiring subsidies can lead to socially efficient allocation of workers.