Macro Theory Seminar - Satoshi Tanaka (UQ)

Title: College Majors and Labour Market Mismatch (co-authored with Michelle Rendall and Yi Zhang)

Abstract:  This paper studies the extent of labor market mismatch across college major-occupation combinations. We use administrative tax panel data merging employment history and university degree information for 10% of the Australian workforce, and estimate returns to college majors by occupation to construct our mismatch measure. Within the framework of a Roy model, we control for selection both at college major and occupation choice by taking advantage of the regional variations in labour market conditions and changing government education policies. We find sizeable mismatch penalties for working in occupations not directly linked to a field of study. Mismatch penalties consistently increase when we control for the selection. Our initial results suggest that (1) STEM related fields (IT, Commerce and Engineering) are the main drivers of labor market mismatch and (2) government education subsides lead to larger mismatch and greater persistence over the life-cycle.