Educational mismatch and labour market transitions in Italy: Is there an unemployment trap?

Abstract

This paper investigates the relationship between educational mismatch and individual unemployment risk in Italy. By testing the theoretical framework of career mobility theory, we look at the labour market transitions of employees and assess whether and to what extent mismatched workers have a higher probability of falling into an unemployment trap with respect to well-matched workers. We control for several demand-side and supply-side determinants of unemployment risk that are likely to have an effect on educational mismatch, and specifically, overeducation. Information on educational mismatch and on supply and demand factors come from a novel dataset obtained by merging two surveys (ICP and PLUS). The results indicate that the patterns depicted by career mobility theory seem to be at work for overeducated and young tertiary-educated workers only, and especially males. Young workers with secondary education and graduate women are at risk of the unemployment trap. The interaction between mismatch and economic structure further reveals that overeducated graduates are also at risk of the unemployment trap, but only if employed in micro and small firms or in the market services sector. Policy implications stressing the complementary role of demand and supply are derived.