Output Costs of Education and Skill Mismatch

Pietro Garibaldi, Pedro Gomes and Thepthida Sopraseuth

No 2006, Discussion Papers from Centre for Macroeconomics (CFM)

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 thesejobs, 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.

Pages: 34 pages
Date: 2020-02
New Economics Papers: this item is included in nep-dge
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Citations: View citations in EconPapers (5)

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Working Paper: Output Costs of Education and Skill Mismatch (2020)
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