The impact of skill mismatch on unemployment, informality, and labour turnover

Luis E. Arango, Juan José Ospina-Tejeiro, Fernando Arias-Rodríguez, Oscar Iván Ávila-Montealegre, Jaime Andrés Collazos-Rodríguez, Diana M. Cortázar Gómez, Juan Pablo Cote-Barón, Julio Escobar-Potes, Aarón Levi Garavito-Acosta, Franky Juliano Galeano-Ramírez, Eliana Rocío González-Molano, Maria Camila Gomez Cardona, Anderson Grajales, David Camilo López-Valenzuela, Wilmer Martinez-Rivera, Nicolás Martínez-Cortés, Rocío Clara Alexandra Mora-Quiñones, Sara Naranjo-Saldarriaga, Antonio Orozco, Daniel Parra-Amado, Julián Pérez-Amaya, José Pulido, Karen L. Pulido-Mahecha, Carolina Ramírez-Rodríguez, Sergio Restrepo Ángel, José Vicente Romero-Chamorro, Nicol Valeria Rodríguez-Rodríguez, Norberto Rodríguez-Niño, Diego Hernán Rodríguez-Hernández, Carlos D. Rojas-Martínez, Johana Andrea Sanabria-Domínguez, Diego Vásquez-Escobar

The objective of this paper is to analyse the impact of skill mismatch on labour turnover,
unemployment, and informality, in the case of Colombia. We study Colombia because it is a
developing country with one of the highest levels of unemployment and informality in Latin
America, along with very restrictive institutions, such as the minimum wage. We found that skill
mismatch can explain the high turnover of workers in the Colombian labour market, evident in the
increase in hirings and also in separations. Additionally, we find a positive significant effect of skill
mismatch on the levels of informality, but no significant effect on unemployment. This evidence
remains even once we consider the role of labour market institutions such as minimum wage and
non-wage labour costs.