Human Capital Mismatch in the British Labour Market

This Thesis explores Human Capital Mismatch in the British labour market. It constructs a novel measure of mismatch based on the skill and jobs distributions.

Higher-skilled workers are in mismatch if they work in a lower productivity job. Results show that mismatch distorts skill prices and its instance increases significantly after the Great Recession in the UK using data from the BHPS/UKHLS. To verify if this is theoretically supported, I use a job search model to identify mismatch capturing unmeasured parts of individual skill. The main theoretical contribution supports that mismatch comes from search frictions in the market. The ranking of workers differs between the work and skills distributions. Further, I replicate the empirical analysis for those born in 1970 using the British Cohort Study 1970. Controlling for their cognitive and non-cognitive skills does not translate in lower incidence of mismatch. Finally, the Thesis presents two case studies. First, it pays particular attention to female workers. They are more likely to be in mismatch because they face more frictions and their skills may be underutilised. Hence, this work explores the determinants of female employees mismatch. The incidence of female mismatch varies from 13% to 34% depending on the control group. Second, it intersects the female public-sector employment with mismatch. It finds that the public sector acts as a waiting

room for a better job for higher-skilled female workers.