Educational mismatch and cognitive skills: effects on wages

This paper aims to analyze the returns to education and educational mismatch in Spain taking account not only of years of education but also of basic skills that workers have actually acquired. Using PIAAC database, the results indicate that both years of education and skills contribute to determine wages, with higher returns to years of education as the level of skills increases. It is also found that returns to years of educational mismatch vary depending on the skills acquired by workers, with a higher premium (penalty) to years of over-(under-) education among workers with higher (lower) levels of skills. Finally, we note that educational mismatch and skills mismatch are two different phenomena in the Spanish labor market, with educational mismatch lying behind the existing wage gap between workers who hold a similar job.