Measuring Occupational Mismatch: Overeducation and Overskill in Europe. Evidence from PIAAC

Occupational mismatch has been a hot topic in the economics literature in recent decades; however, no consensus has been reached on how to conceptualise and measure this phenomenon. We explore the unique opportunity offered by the PIAAC survey to measure occupational mismatch at the individual level based on both education- (overeducation) and skill-based (overskilling) variables by using both objective and subjective measures. For this purpose, we use data on 17 European countries and compute up to 20 different indicators of occupational mismatch. We find that the conceptualisation and measurement of occupational mismatch are indeed important and that education and skill mismatch do not measure the same phenomenon. In fact, only a small percentage of mismatched individuals are mismatched with respect to both education and skill, whereas the majority are mismatched with respect to either education or skill only. At the country level, we find a negative correlation between the incidence of education and skill mismatch, which has important implications for policies aiming to address this labour market inefficiency.