Endogenous Decisions on Acceptable Worker-Job Mismatch Level and the Impact on Workers’ Performance
30 Pages Posted: 9 Nov 2020 Last revised: 7 Dec 2020
Date Written: September 19, 2020
This study examines the impact of the mismatches between workers' characteristics and their jobs on workers' performance. First, we construct a theoretical model that depicts the tendency of a potential worker to take a job offer, even when he or she knows that their personality does not align with the firm's characteristics, as long as they consider the firm to be attractive. According to a model that considers workers' endogenous decisions on an acceptable level of mismatch, a strong tendency for this behavior to occur yields a positive relationship between a worker's acceptable mismatch level and the firm's attractive characteristics. Next, using this relationship, we run an instrumental variable estimation to overcome the endogeneity in the mismatch level to regress the impact of mismatches on workers' performance. The instrumental variable estimation confirms that a higher level of mismatch lowers workers' performance with statistical significance. The main results imply that ``attractive'' firms are more likely to suffer from decreased productivity as a result of mismatches given the positive relationship between workers' acceptable mismatch levels and the firm's attractive characteristics. Since ``attractive'' firms tend to be large firms with a major influence on the economy, the lower performance caused by these mismatches can hinder economic strength and hamper national growth. Thus, it is essential for this issue to be resolved in a timely manner to avoid further losses in international competitiveness.
Keywords: Mismatch; Workers’ Performance; Firms’ Characteristics; Participation Constraint; Instrumental Variable
JEL Classification: D22; J22; J24; M51
Suggested Citation: Suggested Citation