This paper assesses the extent to which social contacts and ethnic concentration
affect the education-occupation mismatch of natives and immigrants. Using
Australian panel data and employing a dynamic random effects probit model, we show
that social capital exacerbates the incidence of over-education, particularly for females.
Furthermore, for the foreign born, ethnic concentration significantly increases the
incidence of over-education. Using an Alternative Index, we also show that social
participation, friends and support and ethnic concentration are the main contributors in
generating a mismatch, while reciprocity and trust does not seem to have any effect on
over-education for both, immigrants and natives. Finally, we show that social networks
are more beneficial for the relatively better educated.

• Social networks and the labour market mismatch