Estimating Human Capital Misallocation with a Panel Variable Coefficient Model

A panel variable coefficient model, incorporating a varying intercept and slope, is employed to estimate the aforementioned formula. The resulting output is subsequently integrated into equation (7) to derive the human capital misallocation indicator, which is subjected to an absolute value transformation. This implies that a greater magnitude of the indicator corresponds to a more pronounced misallocation of human capital. Notably, a change in the explanatory variable and the explained variable in opposite directions is indicative of an improvement in human capital misallocation.