Employment mismatches drive expectational errors among Mozambican graduates

Biased beliefs about future labor-market earnings are commonplace. Based on a longitudinal survey of graduate work transitions in Mozambique, this study assesses the contribution of employment mismatches to a large positive gap between expected (ex ante) and realized (ex post) earnings.

Accounting for the simultaneous determination of pecuniary and non-pecuniary work characteristics, employment mismatches are found to be material and associated with large earnings penalties. A decomposition of these expectational errors shows that around two-thirds are attributable to employment mismatches, suggesting job seekers systematically overestimate the ease of securing 'good jobs'.

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