This study has been prepared within the UNU-WIDER project Inclusive growth in Mozambique-scaling-up research and capacity implemented in collaboration between UNU-WIDER, University of Copenhagen, University Eduardo Mondlane, and the Mozambican Ministry of Economics and Finance. The project is financed through specific programme contributions by the governments of Denmark, Finland, and Norway.

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.”