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Output Costs of Education and Skill Mismatch

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  • Garibaldi, Pietro

    (Collegio Carlo Alberto)

  • Gomes, Pedro Maia

    (Birkbeck, University of London)

  • Sopraseuth, Thepthida

    (University of Cergy-Pontoise)

Abstract

We propose a simple theory of under- and over-employment. Individuals of high type can perform both skilled and unskilled jobs, but only a fraction of low-type workers can perform skilled jobs. People have different non-pecuniary values over these jobs, akin to a Roy model. We calibrate two versions of the model to match moments of 17 OECD economies, considering separately education and skills mismatch. The cost of mismatch is 3% of output on average but varies between -1% to 9% across countries. The key variable that explains the output cost of mismatch is not the percentage of mismatched workers but their wage relative to well-matched workers.

Suggested Citation

  • Garibaldi, Pietro & Gomes, Pedro Maia & Sopraseuth, Thepthida, 2020. "Output Costs of Education and Skill Mismatch," IZA Discussion Papers 12974, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp12974
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    Cited by:

    1. Addison, John T. & Chen, Liwen & Ozturk, Orgul Demet, 2020. "Recessions and Occupational Match Quality: The Role of Age, Gender, and Education," IZA Discussion Papers 13393, Institute of Labor Economics (IZA).
    2. Galanakis, Yannis, 2020. "Female Human Capital Mismatch: An extension for the British public sector," GLO Discussion Paper Series 669, Global Labor Organization (GLO).
    3. Giorgio Brunello & Patricia Wruuck, 2021. "Skill shortages and skill mismatch: A review of the literature," Journal of Economic Surveys, Wiley Blackwell, vol. 35(4), pages 1145-1167, September.
    4. Cervantes, Carla Varona & Cooper, Russell, 2022. "Labor market implications of education mismatch," European Economic Review, Elsevier, vol. 148(C).

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    More about this item

    Keywords

    education mismatch; skill mismatch;

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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