Output Costs of Education and Skill Mismatch

Pietro Garibaldi, Pedro Gomes and Thepthida Sopraseuth

No 12974, IZA Discussion Papers from IZA Network @ LISER

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.

Keywords: education mismatch; skill mismatch (search for similar items in EconPapers)
JEL-codes: E24 J24 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2020-02
New Economics Papers: this item is included in nep-dge, nep-lma and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Related works:
Working Paper: Output Costs of Education and Skill Mismatch (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:iza:izadps:dp12974

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