The impact of public policies on skill mismatch: cross-country analysis in OECD economies

Abstract

Governments aim at reducing skill mismatch because of the adverse effects that it can trigger at the individual and firm level as well as at the country level. Skill mismatch has been defined as a persistent phenomenon with long lasting cross-country differences (Mavromaras et al., 2013). This phenomenon could thus be explained by equivalent cross-country differences in national public policies. The purpose of this thesis is to test the impact of public policies on the probability of being skill mismatched across OECD countries. This thesis explores the recent OECD Survey of Adult Skills from the Programme for the International Assessment of Adult Competencies using an alternative measure of skill mismatch. Data for public policies come from a wide variety of sources. The results show that both policies targeted on firms (‘demand side of skills’) and policies dealing with the available workforce (‘supply side of skills’) can result in a reduction of skill mismatch levels. Regarding the demand side of skills, countries with smooth regulations on the firing of permanent employees, with efficient policies increasing the allocative efficiency and with a strong focus on entrepreneurship seem to experience lower levels of skill mismatch. For the case of the supply side of skills, housing policies efficient at increasing labour mobility together with a higher participation in lifelong learning and higher investments in active labour market programmes and education are expected to be associated with a reduction of skill mismatch.