Matching and decomposing unemployment in a segmented labor market

This article proposes an original analytical framework to study unemployment in segmented labor markets, emphasizing both intra-segment frictions and intersegmental mismatches. It introduces two key indicators to measure matching inefficiency and imbalance between jobseekers and vacancies. The model decomposes unemployment into three components: job shortage, frictional, and mismatch unemployment. Using a modified matching function and an empirical simulation, the study shows how inefficient allocation across segments sustains unemployment. Results highlight that enhancing intra-segment efficiency alone is insufficient; reducing structural mismatches is equally essential. This framework provides practical insights for labor policies focused on mobility, skill alignment, and improved distribution of employment opportunities.