Multidimensional Skill Mismatch

92 Pages Posted: 6 Oct 2015 Last revised: 3 Jan 2019

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: 2015-09-02

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? In this paper, we propose an empirical measure of skill mismatch for a worker-occupation match, which sheds light on these questions. This measure 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 these skills. In this model, mismatch is central to the career outcomes of workers: it reduces the returns to occupational tenure, and it predicts occupational switching behavior. We construct our empirical analog by combining data from the National Longitudinal Survey of Youth 1979 (NLSY79), the Armed Services Vocational Aptitude Battery (ASVAB) on workers, and the O*NET on occupations. Our empirical results show that the effects of mismatch on wages are large and persistent: mismatch in occupations held early in life has a strong negative effect on wages in future occupations. Skill mismatch also significantly increases the probability of an occupational switch and predicts its direction in the skill space. These results provide fresh evidence on the importance of skill mismatch for the job search process.

Keywords: Skill mismatch, match quality, Mincer regression, ASVAB, O*NET, occupational switching

JEL Classification: E24, J24, J31

Suggested Citation

Guvenen, Fatih and Kuruscu, Burhanettin and Tanaka, Satoshi and Wiczer, David G., Multidimensional Skill Mismatch (2015-09-02). FRB St. Louis Working Paper No. 2015-22. Available at SSRN: https://ssrn.com/abstract=2669854

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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