Endogenous Decisions on Acceptable Worker-Job Mismatch Level and the Impact on Workers’ Performance

Abstract

This study examines this endogeneity of worker's acceptable level of mismatch and its impact on workers' performance. First, we construct a theoretical model that depicts the tendency of a potential worker to take a job offer if the firm is ``attractive'' for some reason form them, even when he or she knows that their personality does not align with the firm's characteristics. According to this model, a strong tendency for this behavior yields a positive relationship between a worker's acceptable mismatch level and the firm's attractive characteristics. Next, using this relationship, we run an instrumental variable (IV) estimation to overcome the endogeneity to regress the impact of mismatches on workers' performance. The IV estimation confirms that a higher level of mismatch lowers workers' performance significantly. The main results imply that ``attractive'' firms are more likely to suffer from decreased productivity as a result of mismatches given the positive relationship between workers' acceptable mismatch levels and the firm's attractive characteristics. Since ``attractive'' firms tend to be generally large firms with a major influence on the economy, the lowered performance due to these mismatches can hinder economic strength and hamper national growth. Thus, it is essential for this issue to be resolved in a timely manner to avoid further losses.

Keywords: Mismatch; Workers’ Performance; Firms’ Characteristics; Participation Constraint; Instrumental Variable

JEL Classification: D22; J22; J24; M51