Investigates labor market mismatch and its income effects among university graduates in Indonesia, indicating significant disparities based on mismatch types.
Using a dataset of Indonesian university graduates, this paper investigates the multidimensional nature of labor market mismatch, encompassing vertical (education level), horizontal (field of study), and skill-based mismatches. Overeducation and horizontal mismatch are associated with significant income penalties, while undereducation shows a positive earnings impact. The impacts of skill mismatch depend on the direction, with positive impacts of being overskilled for the job and an income penalty for being underskilled. The analysis further uncovers complementarities across mismatch types, with skill mismatches amplifying vertical and horizontal effects. Notable gender disparities also shape how these mismatches translate into labor market outcomes.
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Ernst et al. (2026) studied this question.
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