A Hedonic Analysis Of Overeducation And Undereducation (original) (raw)
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I examine the wage implications of schooling/occupation mismatches, motivated by the evidence of a poor synchronisation between education systems and labour markets. My main contribution is in studying the role of unobserved heterogeneity in over-and undereducation, drawing on a matched employer-employee panel. Although the identification of the key parameters is difficult due to the lack of variability in the regressors, some interesting results include the evidence found of selectivity in the transitions experienced by workers and of a "stepping-stone" interpretation of schooling mismatches. JEL codes: C23, I21, J24, J31.
The signalling role of over-education and qualifications mismatch
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Over-education may arise from the voluntary decisions of individuals to acquire more qualifications than those required in the workplace, such that over-education may have a signaling role that allows workers to compensate for the lack of certain other skills, or to gain access to the labor market. This paper analyses the signaling role of over-education in Spain, a country characterised by a strongly-segmented labor market with high unemployment levels, and a large number of over-educated. Using micro data for a representative sample of Spanish workers, three different methods are applied to provide evidence that educational mismatch plays a clear signaling role. Policy implications are derived to alleviate inefficiencies in the allocation of educational resources and in the incentives of workers to use over-education as a signal.
Overeducation, undereducation, and the theory of career mobility
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The theory of career mobility (Sicherman and Galor 1990) claims that wage penalties for overeducated workers are compensated by better promotion prospects. Sicherman (1991) was able to confirm this theory in an empirical study. However, the controls for the opposing phenomenon of undereducation used in his tests produced unconvincing results, for which no sound theoretical explanations were given. The only re-test yet conducted (Robst 1995) also produced ambiguous results. In the present paper, we estimate random effects models to analyze relative wage growth using data from the German Socio-Economic Panel. We find that overeducated workers have markedly lower relative wage growth rates than correctly allocated workers, while undereducated workers enjoy higher rates of relative wage growth. Our results cast serious doubt on the career mobility model, at least with respect to the overeducation issue. In view of the acknowledged positive correlation between access to training and upward career mobility, the plausibility of our results is supported by the finding that overeducated workers have less access to formal and informal on-the-job training, while undereducated workers are more likely to be admitted to such programs.
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To study the changes in the effect of degree field on mismatch and the change in the effect of mismatch of wages over time, we revisit a study by Robst (2006) who found that workers who are mismatched earn less than adequately match workers with the same amount schooling. Using recent data from 2015 National Survey of College Graduate (NSCG), we also find a negative relationship between the case of mismatch and the outcome of workers in term of wages, even though the degree of mismatch doesn’t seem to matter as much.
The incidence and wage effects of overeducation
Economics of Education Review, 1981
This paper, based on data from Survey of Family Income and Expenditure of Taiwan, shows that the recent trends of job match in Taiwan labor market have been marked by increasing proportion of overeducated workers due to the higher education expansion policy, while the incidence of undereducation continues to decline. Furthermore, workers' economic position is not completely determined by their educational levels. Working experience also plays an important role in workers' job placement and their wages. Workers with relatively less working experience are more likely to be overeducated, while workers with relatively more working experience are more likely to be undereducated. Overeducated (Undereducated) workers would earn more (less) than their co-workers with adequate education but less (more) than the workers having the same educational level with adequate education for jobs. However, the rewards (penalties) to adequate education and overeducation (undereducation) decline as more experience accumulated. Evidence also shows effect of bumping down from overeducation on the wages and employment of lower educated workers.
Wage impacts of schooling mismatches: Evidence from a matched employer-employee panel
Unpublished manuscript, University of Warwick, 2001
I address the spread and wage implications of schooling mismatches, given the possible lack of synchronisation in the education system-labour market relationship. My main contribution is in studying the role of unobserved heterogeneity in the over-and under-education phenomena, by drawing on a matched employer-employee panel. I find that the identification of the key parameters is made difficult due to the lack of variability in the regressors. Moreover, I detect strong evidence of selectivity in the transitions experienced by workers, which is likely to seriously bias the results. Finally, some evidence supporting a "stepping-stone" interpretation of schooling mismatches is presented.
Recently, the number of graduates is increasing rapidly, which changes the demographics of skilled workers. It signals the mismatch between education and labor demand. The insights about the impact of over-education on earnings are necessary to advise the policy of allocating resources for education and training. The key econometric issues in this topic are the endogeneities that this paper suggests to use the propensity score matching (PSM) in the dataset of UK LFS (First Quarter, 2015), involving both high-and low-skilled jobs from nine major occupation groups. By PSM with different bandwidths and methods of matchings, no significant effect of over-education on earnings is found, in contrast to the OLS estimates. This implies that the selection bias is significant, and in this case, PSM is believed to be superior to OLS. However, both methods face the same risk of other unobserved confounders. The insignificant over-education penalty also indicated two effects in UK Labor Market: i) Compressed lower-end of earnings distribution (which compensates the penalty of over-education; ii) Screening effect, we recognized that disadvantaged groups in labor market is more likely over-educated. It is concluded that aggregated effect of over-education penalty probably become insignificant when the effect is compensated among occupation groups.
Education mismatch and qualification mismatch: monetary and non-monetary consequences for workers
Using Spanish data from European Union Household Panel Survey corresponding to 2001, we find that the incidence and the consequences, monetary and non-monetary, are different for the job-worker qualification and education mismatches. In fact, only 36% of workers have the same type of fit under both criterions of classification. Additionally, the qualification mismatches have worse consequences for workers than education mismatches. Specifically, the monetary consequences are neutrals for overqualified workers, but negatives for underqualified workers, while the wage of educational mismatched workers is not significantly different of those who have similar characteristics and are accurately match in terms of formal education. However, the overeducated workers earn higher wages than their well-matched co-workers and the wage penalization for one year of undereducation is lower than the reward for one year of required education. On the other hand, the analysis of the non-monetary conse...
Education and Job Market Signalling: How Robust is the Nexus?
SSRN Electronic Journal, 1999
In this paper the Signalling approach to the explanation of wage differentials is analysed in a critical way. Departing from the classic Spence's model, the article shows how the introduction of inequalities in accessing to education leads to separating equilibria characterised by redistributive effects among workers and firms, with lower wages for high skill workers respect to the traditional model. Moreover pooling equilibria can also exist as effect of such inequalities; in this case a unique wage exists for all types of workers, operating as a redistributive effect from high-skill to low-skill workers.