Do Horizontal and Vertical Mismatches Affect Workers' Incomes in Cameroon? Results From the Instrumental Variable Models Using the Function-control Approach

Human capital theory postulates that education improves an individual's productivity and earning potential. However, when there is a mismatch between an individual's education and employment, the return on investment in human capital decreases, resulting in reduced earnings. This paper uses employment data from Cameroon's National Institute of Statistics to examine the wage effects of horizontal and vertical mismatches. To this end, we estimate the augmented Mincer model using the double ordinary least squares method via the control function approach to deal with endogeneity bias and the quantile regression method. The results indicate that the mismatch between education and employment, whether horizontal or vertical, is linked to a wage penalty. In particular, the wage penalty associated with horizontal mismatch is greater than that associated with vertical mismatch. Furthermore, the results reveal that private sector workers suffer greater penalties due to horizontal mismatch, while those in the public sector are more affected by vertical mismatch. Additionally, the results reveal a significant trend towards a greater wage penalty for men than for women. JEL Classification : I21 ; J24 ; J31 ; J41