The two faces of worker specialization

We study how worker specialization — the distance between a worker’s skill set and those prevalent in the labor market — shapes employment outcomes. Using US and French data, we first document that specialized jobs are characterized by asymmetric skill profiles and a scarcity of nearby employment opportunities. We incorporate these features into a random search model with multidimensional skills, mismatch penalties and skill complementarity. We show that specialization lowers job-finding rates due to a lack of suitable jobs, but raises re-employment wages via improved productivity. Empirical evidence from displaced workers in both countries confirms these predictions. Our findings reconcile competing views in the literature by showing that specialization entails trade-offs and is neither uniformly beneficial nor harmful.