Quantifying the productivity effects of education-job mismatch: a cross-country analysis

ABSTRACT

This study addresses the relationship between education-job mismatch and aggregate labor market performance in a cross-country setting. We examine the effect of education-job mismatch on aggregate productivity across 15 countries using data from the OECD Survey of Adult Skills (PIAAC). We measure mismatch levels and compute their incidence across countries. Next, the paper develops a model linking mismatch to aggregate productivity. In the model the allocation of labor across the types of mismatch is derived from the endogenous process. The findings show that reducing mismatch results in increases in output per capita. This provides evidence for an important role of the allocation of workers according to jobs that match their fields of study and qualification levels not only for individual earnings but also for aggregate outcomes.

KEYWORDS:

• Education-job mismatch
• field of study
• qualification
• aggregate productivity

JEL CODES:

• J24
• I2
• O11
• O40

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 For recent studies utilizing the Frechet distribution to analyze the resource allocation, refer to Hsieh et al. (2019), Bryan and Morten (2019) and Abdulla (2019).

2 The advantage of using PISA data is that the test results are internationally comparable assessing skills of a representative sample of high schoolers across countries. An extensive literature exists that uses PISA test results as a proxy for the quality of education (Cubas, Ravikumar, and Ventura 2016; Hanushek and Woessmann 2008; Woessmann 2016).

3 In Section 4.4 we check the sensitivity of the results to different values of the parameters.