Fiscal Tightening and Skills Mismatch

Konstantinos Mavrigiannakis (), Andreas Vasilatos () and Eugenia Vella
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Konstantinos Mavrigiannakis: Athens University of Economics and Business
Andreas Vasilatos: Athens University of Economics and Business

No 2313, DEOS Working Papers from Athens University of Economics and Business

Abstract: The paper documents a new link between fiscal tightening and the vertical skills mismatch rate (share of over-qualified workers). Using data for Greece, where this rate exceeds one-third, and a variety of structural Bayesian vector auto regressions and identification strategies, we show that fiscal tightening increases mismatch. We then introduce the latter in a DSGE model with heterogeneous households and labor frictions. In line with the data, a fiscal tightening shock raises the mismatch rate in the model. This result holds for production function specifications both with and without capital-skill complementarity (CSC).

Keywords: skills mismatch; fiscal shocks; capital-skill complementarity; SVAR; DSGE model (search for similar items in EconPapers)
JEL-codes: E62 F41 J24 J63 (search for similar items in EconPapers)
Date: 2023-05-30
New Economics Papers: this item is included in nep-dge and nep-lma
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Persistent link: https://EconPapers.repec.org/RePEc:aue:wpaper:2313

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