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Fiscal Tightening and Skills Mismatch

Author

Listed:
  • Konstantinos Mavrigiannakis

    (Athens University of Economics and Business)

  • Andreas Vasilatos

    (Athens University of Economics and Business)

  • Eugenia Vella

Abstract

The paper documents a new link between fiscal tightening and the vertical skills mismatch rate (share of over-qualified workers). Using data for Greece, where this rate exceeds one-third, and a variety of structural Bayesian vector auto regressions and identification strategies, we show that fiscal tightening increases mismatch. We then introduce the latter in a DSGE model with heterogeneous households and labor frictions. In line with the data, a fiscal tightening shock raises the mismatch rate in the model. This result holds for production function specifications both with and without capital-skill complementarity (CSC).

Suggested Citation

  • Konstantinos Mavrigiannakis & Andreas Vasilatos & Eugenia Vella, 2023. "Fiscal Tightening and Skills Mismatch," DEOS Working Papers 2313, Athens University of Economics and Business.
    • Handle: RePEc:aue:wpaper:2313
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    Keywords

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    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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