Mismatch and Skill Utilization: Determinants and Consequences

Abstract

A growing economic literature has focused on the impact of cognitive skills on labour market outcomes. While workers differ in their skills, they also face different opportunities to use them on the labour market. This may lead to important skill mismatches that have often been investigated in the literature in term of over-education. Yet, over-education measures used in the literature may capture unobserved ability rather than genuine skill mismatches. We contribute by using objective information on basic skills and their utilization at the workplace with data from the Swiss sample of the Adult literacy and lifeskills survey. We analyze the determinants of skill mismatches and their impact on wages. We find important gender differences in the probability of being over or under-skilled. Although our research focuses on a limited set of skills, our results show that skill mismatches have important effects on wages. The impact of skill mismatches on wages depends heavily on the type of education (vocational or academic).

Keywords: Skill mismatch, gender wage gap

JEL Classification: J24, J31