Vertical and horizontal job-education mismatches and wages: A quantitative analysis of university graduates in Vietnam

Using data from the 2018–2021 Labor Force Survey, this paper aims to estimate job-education mismatches and their effect on wages among university graduates in Vietnam. We employed an instrumental variable estimator to account for the possible endogeneity of job mismatch. By combining both vertical and horizontal measures of mismatch, we provide the first estimates for four types of mismatch, namely (i) full match (horizontal and vertical); (ii) vertical mismatch; (iii) horizontal mismatch; and (iv) full mismatch (horizontal and vertical). We find that the proportion of graduates with fully matched jobs declined over time, while that of those in mismatched jobs, either vertical, horizontal, or both, increased. Our econometric analysis confirms that wage penalties occur for certain types of job mismatch. Specifically, graduates with a vertically mismatched or fully mismatched job earn lower wages than those with a fully matched job. Such wage penalties vary between male and female graduates, public and non-public sectors, and young and old graduates. While the horizontal mismatch does not result in a wage penalty for older graduates, it does for younger ones. Based on empirical findings, we provide some policy implications for job mismatches in Vietnam. • This paper utilizes 2018–2021 Labor Force Survey data to estimate job mismatches and their effect on wages among Vietnamese university graduates. • The study employs an instrumental variable estimator to account for job mismatch endogeneity. • The paper provides the first estimates for four types of mismatch: full match, vertical mismatch, horizontal mismatch, and full mismatch. • The paper finds that over time, graduates with fully matched jobs decline, while those with mismatched jobs increase. • The study also confirms wage penalties for certain types of job mismatch. Wage penalties vary between genders, sectors, and age groups.