Mexico's labor market: The importance of education-occupation matching on wages and productivity in developing countries

The positive impact of education on earnings, wages, and economic growth is well documented; however, the issue of education-occupation matching in developing countries has been largely ignored. Since workers’ levels of schooling and their occupations’ required level of education both affect wages, policymakers may find it useful to note if such mismatches exist, if they impact wages, and if they can be avoided. Empirical results from Mexico suggest that in order to obtain the maximum economic benefits from increases in educational attainment levels, a developing country needs to take steps to assure increases in occupational levels also occur. Additional evidence of the positive link between educational attainment and wages is also provided. Due to the multi-period nature of the data; a new method of measuring required education is developed which opens up the education-occupation matching literature to data sets which are not cross sectional in nature.