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. • Worker specialization: average distance from job requirements in the labor market. • Specialized jobs feature skill asymmetry and fewer nearby job opportunities. • Asymmetry raises wages, but scarcity increases unemployment duration. • Data from France and the US support these effects for displaced workers. • Model shows specialization slightly lowers workers’ overall value in France.