Determinants and wage penalty of qualification mismatches: the case of palestine

Abstract

ABSTRACT Although it might be considered one of the main vigorous distortions in the Palestinian labour market, qualification mismatch has not been studied by researchers in Palestine. We draw upon this gap using Palestinian labour force survey between 2009 and 2016. This paper therefore presents a multinomial logit model to identify the factors affecting the prevalence of qualification mismatch and uses the Verdugo and Verdugo model to estimate its impact on wages. Findings support the spatial mobility theory, job competition theory and assignment theory which consider mismatch as a persistence phenomenon. Accepting mismatched job in early period of career life will not shorten the pathway for a matching job in the future. Female, married workers, rural and camp dwellers, workers in Israeli labour market, workers in construction, services, commerce and hotel sectors have more likelihood to face mismatches than others. Findings also reveal the existence of a wage penalty due to over-qualification mismatches and wage premiums for underqualification.