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Wage effects of job-worker mismatches: Heterogeneous skills or institutional effects?


  • Velden R.K.W. van der
  • Badillo-Amador L.
  • Allen J.P.



The strong wage effects related to mismatches between a workers education and that required in the job are usually attributed to assignment theory. This theory asserts that productivity and wages depend on the education-job match, which determines the utilization of skills. However, recent research shows that educational mismatches are only weakly related to skill utilization, which in any case fails to account for the bulk of the wage effects. Two alternative theories have been put forward to explain the observed wage effects. One points to wage setting institutions that cause wages to be based on job characteristics regardless of individual performance, the other to the heterogeneity of skills within a given educational level. Both theories explain existing results, but have never been tested directly. In this paper we show that the former theory explains observed wage effects in the public sector, and the latter theory those in the private sector.

Suggested Citation

  • Velden R.K.W. van der & Badillo-Amador L. & Allen J.P., 2013. "Wage effects of job-worker mismatches: Heterogeneous skills or institutional effects?," Research Memorandum 071, Maastricht University, Graduate School of Business and Economics (GSBE).
  • Handle: RePEc:unm:umagsb:2013071

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    References listed on IDEAS

    1. McGuinness, Seamus & Sloane, Peter J., 2011. "Labour market mismatch among UK graduates: An analysis using REFLEX data," Economics of Education Review, Elsevier, vol. 30(1), pages 130-145, February.
    2. Arnaud Chevalier & Joanne Lindley, 2009. "Overeducation and the skills of UK graduates," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 172(2), pages 307-337.
    3. Allen, Jim & van der Velden, Rolf, 2001. "Educational Mismatches versus Skill Mismatches: Effects on Wages, Job Satisfaction, and On-the-Job Search," Oxford Economic Papers, Oxford University Press, vol. 53(3), pages 434-452, July.
    4. Bauer, Thomas K., 2002. "Educational mismatch and wages: a panel analysis," Economics of Education Review, Elsevier, vol. 21(3), pages 221-229, June.
    5. Sattinger, Michael, 1993. "Assignment Models of the Distribution of Earnings," Journal of Economic Literature, American Economic Association, vol. 31(2), pages 831-880, June.
    6. Gyourko, Joseph & Tracy, Joseph, 1988. "An Analysis of Public- and Private-Sector Wages Allowing for Endogenous Choices of Both Government and Union Status," Journal of Labor Economics, University of Chicago Press, vol. 6(2), pages 229-253, April.
    7. Cohn, Elchanan & Khan, Shahina P., 1995. "The wage effects of overschooling revisited," Labour Economics, Elsevier, vol. 2(1), pages 67-76, March.
    8. Cohn, Elchanan & Ng, Ying Chu, 2000. "Incidence and wage effects of overschooling and underschooling in Hong Kong," Economics of Education Review, Elsevier, vol. 19(2), pages 159-168, April.
    9. Lourdes Badillo-Amador & Luis E. Vila, 2013. "Education and skill mismatches: wage and job satisfaction consequences," International Journal of Manpower, Emerald Group Publishing, vol. 34(5), pages 416-428, August.
    10. Giorgio Di Pietro & Peter Urwin, 2006. "Education and skills mismatch in the Italian graduate labour market," Applied Economics, Taylor & Francis Journals, vol. 38(1), pages 79-93.
    11. Sicherman, Nachum, 1991. ""Overeducation" in the Labor Market," Journal of Labor Economics, University of Chicago Press, vol. 9(2), pages 101-122, April.
    12. repec:eme:ijmpps:v:34:y:2013:i:1:p:416-428 is not listed on IDEAS
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    Cited by:

    1. Nuria Sánchez-Sánchez & Seamus McGuinness, 2015. "Decomposing the impacts of overeducation and overskilling on earnings and job satisfaction: an analysis using REFLEX data," Education Economics, Taylor & Francis Journals, vol. 23(4), pages 419-432, August.
    2. Lucia Mateos & Ines Murillo & Maria del Mar Salinas, 2014. "Desajuste educativo y competencias cognitivas: efectos sobre los salarios," Hacienda Pública Española, IEF, vol. 210(3), pages 85-108, September.
    3. McGuinness, Seamus & Sloane, Peter J., 2011. "Labour market mismatch among UK graduates: An analysis using REFLEX data," Economics of Education Review, Elsevier, vol. 30(1), pages 130-145, February.
    4. Seamus McGuinness & Delma Byrne, 2015. "Born abroad and educated here: examining the impacts of education and skill mismatch among immigrant graduates in Europe," IZA Journal of Migration, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-30, December.

    More about this item


    Wage Level and Structure; Wage Differentials; Public Sector Labor Markets; Labor-Management Relations; Trade Unions; and Collective Bargaining: General;

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J45 - Labor and Demographic Economics - - Particular Labor Markets - - - Public Sector Labor Markets
    • J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General

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