Master’s degree project: The Impact of Skill Mismatch on Aggregate Productivity: cross-country analysis in OECD economies, Eirini Zira (KTH 2016)
Abstract: The present study explores the relationship between skill mismatch in two main categories, numeracy and literacy, and aggregate productivity as derived from a decomposition of productivity into within-rm productivity and allocative eciency. Skill mismatch is considered a rather persistent phenomenon with long lasting eects in various aspects. In the analysis covered, OECD Survey of Adult Skills (PIAAC) database was employed for the aggregated indicators of skill mismatch while productivity was measured using ORBIS commercial database. The key findings leveal a strong and negative relationship between skill mismatch in numeracy and productivity, which stems from a negative relationship between the same category and the within-rm labor productivity. Under-skilling in numeracy exhibits a negative effect on productivity while over-skilling seems not to be related in the current specication. Based on the relationship between competition and productivity, market power is used to control for the competition inierent
sectors. The results suggest that higher market share translates to higher productivity and the relationship is statistically signicant.