Piero De Dominicis

What are the consequences of early-career skill mismatch for individual wages and aggregate productivity? To answer this question, I develop a general equilibrium dynamic Roy model in which workers have imperfect information about their multidimensional skills and accumulate task-specific human capital on the job. Estimating the model on Portuguese administrative data, I find that early career mismatch driven by information frictions generates a 6.7% loss in aggregate productivity. Wage losses from mismatch are largest early in the career, but persist over the lifecycle because of switching costs and imperfect transferability of human capital. I then study policy counterfactuals aimed at reducing this persistent mismatch. Reducing switching costs lowers the aggregate cost of mismatch, while encouraging early-career experimentation increases wages later in life, at the cost of lower wages initially. Finally, I use the model to quantify the gains from policies that provide workers with information about their own skills at different stages of the career: a calibrated skill assessment delivered at labor-market entry raises aggregate output by 1.7%, and its effectiveness decays sharply when the same assessment is delivered later in the career.