The effect of education-job mismatch on net income: evidence from a developing country

Abstract

This paper explores the impact of education-job mismatch on the net income of workers in the context of Bosnia-Herzegovina. We used an OLS linear regression method on data from the Measure BiH Youth Survey. A log-transformation of the dependent variable created the left-side semilog functional form, which is typically used in models of the earnings of individuals. Our findings strongly support the statement that education-job mismatch has a significant effect on net income. Workers can expect net income differences between 13% and 15% if their level of education does not match that required for their job. However, our results show that the impact of education-job mismatch depends on the level of schooling and age of respondents. Results regarding education-job mismatch vary across studies, but our study is the first to examine the effect of education-job mismatch on net income in the context of Bosnia-Herzegovina. Second, the effect of education-job mismatch might depend on the choice of estimation method for incidences of overeducation and undereducation. Third, we emphasise the importance of understanding interactions, and fourth, we introduce new variables to understand how they influence earnings. These include religiousness, and the importance of belonging to a family, or a particular city.