Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/215370 
Year of Publication: 
2020
Series/Report no.: 
IZA Discussion Papers No. 12974
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
We propose a simple theory of under- and over-employment. Individuals of high type can perform both skilled and unskilled jobs, but only a fraction of low-type workers can perform skilled jobs. People have different non-pecuniary values over these jobs, akin to a Roy model. We calibrate two versions of the model to match moments of 17 OECD economies, considering separately education and skills mismatch. The cost of mismatch is 3% of output on average but varies between -1% to 9% across countries. The key variable that explains the output cost of mismatch is not the percentage of mismatched workers but their wage relative to well-matched workers.
Subjects: 
education mismatch
skill mismatch
JEL: 
E24
J24
Document Type: 
Working Paper

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