Quantifying the productivity effects of education-job mismatch: a cross-country analysis

Abstract

ABSTRACT This study addresses the relationship between education-job mismatch and aggregate labor market performance in a cross-country setting. We examine the effect of education-job mismatch on aggregate productivity across 15 countries using data from the OECD Survey of Adult Skills (PIAAC). We measure mismatch levels and compute their incidence across countries. Next, the paper develops a model linking mismatch to aggregate productivity. In the model the allocation of labor across the types of mismatch is derived from the endogenous process. The findings show that reducing mismatch results in increases in output per capita. This provides evidence for an important role of the allocation of workers according to jobs that match their fields of study and qualification levels not only for individual earnings but also for aggregate outcomes.