Labor Market Implications of Education MisMatch

This project studies the impact of education mismatch on labor outcomes. Across our sample of OECD countries, there is evidence of mismatch in education choices and labor markets. Labor market outcomes are not independent of education mismatch. Our framework for analysis is a dynamic choice model, focusing on decisions on education and training. From the estimation of model parameters, the main factor explaining education mismatch is a shock to the perceived value of education. In Germany, imperfect information about ability at the time of the education decision creates mismatch as well. From simulations of lifecycle dynamics and counterfactual experiments, among four key countries, education undermatch in Japan is sustained through labor market mechanisms while in Germany, Italy and the US, education undermatch is resolved. Training plays a key role in these dynamics