Scandinavian Working Papers in Economics

Working Paper Series,
IFAU - Institute for Evaluation of Labour Market and Education Policy

No 2015:26: Mismatch of talent: evidence on match quality, entry wages, and job mobility

Peter Fredriksson (), Lena Hensvik () and Oskar Nordström Skans ()
Additional contact information
Peter Fredriksson: Department of Economics, Stockholm University, Postal: SE - 106 91 Stockholm, Sweden
Lena Hensvik: IFAU - Institute for Evaluation of Labour Market and Education Policy, Postal: P O Box 513, SE-751 20 Uppsala, Sweden
Oskar Nordström Skans: Department of Economics, Uppsala University, Postal: Box 513, SE-751 20 Uppsala, Sweden

Abstract: We examine the direct impact of idiosyncratic match quality on entry wages and job mobility using unique data on worker talents matched to job-indicators and individual wages. Tenured workers are clustered in jobs with high job-specific returns to their types of talents. We therefore measure mismatch by how well the types of talents of recent hires correspond to the talents of tenured workers performing the same jobs. A stylized model shows that match quality has a smaller impact on entry wages but a larger impact on separations and future wage growth if matches are formed under limited information. Empirically, we find such patterns for inexperienced workers and workers who were hired from non-employment, which are also groups where mismatch is more pronounced on average. Most learning about job-specific mismatch happens within a year. Experienced job-to-job movers appear to match under much less uncertainty. They are better matched on entry and mismatch have a smaller effect on their initial separation rates and later wage growth. Instead, match quality is priced into their starting wages.

Keywords: Matching; Job search; Comparative advantage; Employer learning

JEL-codes: J24; J31; J62; J64

50 pages, November 18, 2015

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