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Overeducation, market recognition, and effective labour supply

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  • He, Yu
  • Peng, Xiujian
  • Xu, Hangtian

Abstract

Supply of skilled workers in an economy is usually measured based on the number of highly educated people. This may, however, lead to an overestimation of effective labour supply when considerable people are overeducated. By incorporating a concept of “market recognition,” which proxies the gap between the capabilities reflected through the education level and the capabilities required by employers, we establish a general equilibrium model to quantify this gap in China during 1999–2011. Our calibration results show that overeducation had deteriorated as market recognition continued to decline. We give an interpretation from the perspective of effective labour supply.

Suggested Citation

  • He, Yu & Peng, Xiujian & Xu, Hangtian, 2020. "Overeducation, market recognition, and effective labour supply," China Economic Review, Elsevier, vol. 59(C).
    • Handle: RePEc:eee:chieco:v:59:y:2020:i:c:s1043951x19301452
    DOI: 10.1016/j.chieco.2019.101384
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    2. Hao, Zedong & Wang, Yun, 2022. "Education signaling, effort investments, and the market's expectations: Theory and experiment on China's higher education expansion," China Economic Review, Elsevier, vol. 75(C).

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    More about this item

    Keywords

    Overeducation; Market recognition; Human capital; Labour supply; Computable general equilibrium model (CGE);
    All these keywords.

    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • I26 - Health, Education, and Welfare - - Education - - - Returns to Education

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