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The State, Determinants, and Consequences of Skills Mismatch in the Ethiopian Labour Market

Berhe Mekonnen () and Tsegay Tekleselassie ()
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Berhe Mekonnen: Consultant | Ethiopian Development Research Institute

No 21, Working Papers from Ethiopian Development Research Institute

Abstract: The study analyses the incidence of labour market mismatch, identifies the correlates of skills mismatch that shed light on the causes of the problem, and investigates its consequences on well-being. It is the first attempt to formally study skills mismatch in the urban labour market in Ethiopia. Using several indicators of qualification mismatch, we find that about a quarter of employees are mismatched with over-qualification being the more prevalent problem. In comport with findings for developed countries, our analysis reveals overqualified worker report lower job satisfaction compared to the well-matched. We also find that skill-mismatch, particularly over education lowers wages; while education is positively and significantly associated with wage, overeducated workers earn less than those well-matched for their level of education. This implies a wage penalty associated with over-qualification even in a developing country context. Our study highlights that labour market mismatch is not only a phenomenon of the developed world but also the developing countries. Hence, skills mismatch needs to be a key aspect of labour market policy making along with issues of decent and productive work.

Keywords: Skills mismatch; education; labour market; Ethiopia; welfare (search for similar items in EconPapers)
JEL-codes: I26 I31 J31 J60 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-lab
Date: 2018-05
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