Multidimensional Skill Mismatch

92 Pages Posted: 20 Jul 2015

See all articles by Fatih Guvenen

Fatih Guvenen

University of Minnesota - Department of Economics; National Bureau of Economic Research (NBER)

Burhanettin Kuruscu

University of Toronto - Department of Economics

Satoshi Tanaka

University of Queensland

David G. Wiczer

SUNY Stony Brook - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: July 2015

Abstract

What determines the earnings of a worker relative to his peers in the same occupation? What makes a worker fail in one occupation but succeed in another? More broadly, what are the factors that determine the productivity of a worker-occupation match? To help answer questions like these, we propose an empirical measure of multidimensional skill mismatch, which is based on the discrepancy between the portfolio of skills required by an occupation and the portfolio of abilities possessed by a worker for learning those skills. This measure arises naturally in a dynamic model of occupational choice and human capital accumulation with multidimensional skills and Bayesian learning about one’s ability to learn skills. Not only does mismatch depress wage growth in the current occupation, it also leaves a scarring effect—by stunting skill acquisition—that reduces wages in future occupations. Mismatch also predicts different aspects of occupational switching behavior. We construct the empirical analog of our skill mismatch measure from readily available US panel data on individuals and occupations and find empirical support for these implications. The magnitudes of these effects are large: moving from the worst- to the best-matched decile can improve wages by 11% per year for the rest of one’s career.

Suggested Citation

Guvenen, Fatih and Kuruscu, Burhanettin and Tanaka, Satoshi and Wiczer, David G., Multidimensional Skill Mismatch (July 2015). NBER Working Paper No. w21376. Available at SSRN: https://ssrn.com/abstract=2633332

Fatih Guvenen (Contact Author)

University of Minnesota - Department of Economics ( email )

Minneapolis, MN 55455
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Burhanettin Kuruscu

University of Toronto - Department of Economics ( email )

Toronto, Ontario M5S 3G8
Canada

HOME PAGE: http://https://sites.google.com/site/bkuruscu

Satoshi Tanaka

University of Queensland ( email )

St Lucia
Brisbane, Queensland 4072
Australia

David G. Wiczer

SUNY Stony Brook - Department of Economics ( email )

NY 11733-4384
United States

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