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Talent Misallocation in Europe

Author

Listed:
  • Almarina Gramozi
  • Theodore Palivos
  • Marios Zachariadis

Abstract

We use microeconomic data on wages and individual characteristics across twenty European economies for the period 2004 to 2015, to detect patterns of misallocation arising in these economies based on individuals’ gender, immigrant status, or private versus public sector affiliation. We develop a theoretical model where being relatively isolated, e.g., due to gender, immigrant status, or private sector affiliation, leads to lower wages and talent misallocation. Our empirical results suggest that being a female or immigrant, and working in the private sector, exert a negative impact on one’s wages beyond that explained by their economic characteristics, suggestive of persistent talent misallocation in Europe during the period under study. Notably, countries such as Cyprus, Greece, Italy and Spain are systematically found at the top of the overall talent misallocation index we construct year-after-year for the period under study. Our work provides new cross-country micro-econometric evidence about the importance of various forms of talent misallocation for aggregate economic outcomes.

Suggested Citation

  • Almarina Gramozi & Theodore Palivos & Marios Zachariadis, 2019. "Talent Misallocation in Europe," University of Cyprus Working Papers in Economics 05-2019, University of Cyprus Department of Economics.
  • Handle: RePEc:ucy:cypeua:05-2019
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    File URL: http://papers.econ.ucy.ac.cy/RePEc/papers/05-19.pdf
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    References listed on IDEAS

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    2. Marcelo dos Santos & Tiago Cavalcanti, 2015. "(Mis)Allocation Effects of an Overpaid Public Sector," 2015 Meeting Papers 1094, Society for Economic Dynamics.
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    More about this item

    Keywords

    economic growth; wage gap; inefficiency;

    JEL classification:

    • E0 - Macroeconomics and Monetary Economics - - General
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe

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