Optimal ‘Mismatch’ and Promotions

Seeming ‘mismatches’ in which workers are either under-or overqualified, are shown to be optimal. From the firm's point of view, although turnover will be positively related to overqualification, training costs will be inversely related to overqualification. Further, overqualified workers constitute a pool from which promotions are made. Workers enter seeming mismatches due to search and mobility costs and because of opportunities for promotion. Estimates using a unique data set indicate that workers who are overqualified at hire receive less training and more promotions, and that workers overqualified for their current job are more likely to quit.