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Effective skill: a new theoretical perspective on the relation between skills, skill use, mismatches, and wages

Author

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  • Rolf van der Velden
  • Ineke Bijlsma

Abstract

Skills and skill mismatches affect workers’ productivity. However, current approaches to measuring this problem fail to specify the underlying mechanism. In this paper, we develop a new perspective by integrating skill proficiency and skill use into a new concept called ‘effective skill’. Effective skill is defined as a multiplicative function of skill proficiency and skill use. The intuitive understanding of this concept is that a skill can have no effect on productivity if it is not used and, vice versa, the effect of using skills is moderated by the skill proficiency level. We develop a skill matching model using data from the OECD PIAAC Survey. We show that there is no effect of numeracy on wages, other than through the use of numeracy skills. Moreover, we show that a skill mismatch model based on this concept is superior to alternative skill mismatch models in explaining wage differences.

Suggested Citation

  • Rolf van der Velden & Ineke Bijlsma, 2019. "Effective skill: a new theoretical perspective on the relation between skills, skill use, mismatches, and wages," Oxford Economic Papers, Oxford University Press, vol. 71(1), pages 145-165.
    • Handle: RePEc:oup:oxecpp:v:71:y:2019:i:1:p:145-165.
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    File URL: http://hdl.handle.net/10.1093/oep/gpy028
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    Citations

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    Cited by:

    1. Jacobs, Babs & van der Velden, Rolf, 2021. "Exploring the uncharted waters of educational mobility: The role of key skills," Research Memorandum 016, Maastricht University, Graduate School of Business and Economics (GSBE).
    2. Pérez Rodrigues, Sandra & Huijts, Tim & van der Velden, Rolf & Jacobs, Babs, 2020. "Required literacy and numeracy skill levels for occupations in OECD countries," ROA Technical Report 008, Maastricht University, Research Centre for Education and the Labour Market (ROA).
    3. Maria-Chiara Morandini & Anna Thum-Thysen & Anneleen Vandeplas, 2020. "Facing the Digital Transformation: Are Digital Skills Enough?," European Economy - Economic Briefs 054, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.

    More about this item

    JEL classification:

    • I26 - Health, Education, and Welfare - - Education - - - Returns to Education
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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