Talent Misallocation in Europe

Almarina Gramozi (), Theodore Palivos and Marios Zachariadis

University of Cyprus Working Papers in Economics from University of Cyprus Department of Economics

Abstract: We use microeconomic data on wages and individual characteristics across twenty European economies for the period 2004 to 2015, to detect patterns of misallocation arising in these economies based on individuals’ gender, immigrant status, or private versus public sector affiliation. We develop a theoretical model where being relatively isolated, e.g., due to gender, immigrant status, or private sector affiliation, leads to lower wages and talent misallocation. Our empirical results suggest that being a female or immigrant, and working in the private sector, exert a negative impact on one’s wages beyond that explained by their economic characteristics, suggestive of persistent talent misallocation in Europe during the period under study. Notably, countries such as Cyprus, Greece, Italy and Spain are systematically found at the top of the overall talent misallocation index we construct year-after-year for the period under study. Our work provides new cross-country micro-econometric evidence about the importance of various forms of talent misallocation for aggregate economic outcomes.

Keywords: economic growth; wage gap; inefficiency (search for similar items in EconPapers)
JEL-codes: E0 J31 O4 O52 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2019-03
New Economics Papers: this item is included in nep-eur, nep-lma and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:ucy:cypeua:05-2019

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