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Inefficient self-selection into education and wage inequality

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Author Info

  • Ordine, Patrizia
  • Rose, Giuseppe

Abstract

Abstract This paper proposes a theoretical framework where within graduates wage inequality is related to overeducation/educational mismatch in the labor market. We show that wage inequality may arise because of inefficient self-selection into education in the presence of ability-complementary technological progress and asymmetric information on individuals' ability. In this setting, a crucial role is played by educational quality since it determines the signaling mechanisms in the labor market. We report some empirical evidence on the impact of mismatch, individual ability, family background, and university features on wages of Italian graduates and we suggest the importance of considering education quality as a policy instrument for reducing educational mismatch and wage inequality.

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Bibliographic Info

Article provided by Elsevier in its journal Economics of Education Review.

Volume (Year): 30 (2011)
Issue (Month): 4 (August)
Pages: 582-597

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Handle: RePEc:eee:ecoedu:v:30:y:2011:i:4:p:582-597

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Web page: http://www.elsevier.com/locate/econedurev

Related research

Keywords: Wage inequality Mismatch Higher education quality Signaling equilibria Selection models;

References

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  1. Budria, Santiago & Moro-Egido, Ana, 2004. "Education, Educational Mismatch, and Wage Inequality: Evidence for Spain," MPRA Paper 93, University Library of Munich, Germany.
  2. Massimiliano Bratti & Daniele Checchi & Guido de Blasio, 2008. "Does the expansion of higher education increase the equality of educational opportunities? Evidence from Italy," Temi di discussione (Economic working papers) 679, Bank of Italy, Economic Research and International Relations Area.
  3. Brunello, Giorgio & Lupi, Claudio & Ordine, Patrizia, 2001. "Widening differences in Italian regional unemployment," Labour Economics, Elsevier, vol. 8(1), pages 103-129, January.
  4. Igal Hendel & Joel Shapiro & Paul Willen, 2004. "Educational opportunity and income inequality," Public Policy Discussion Paper 04-5, Federal Reserve Bank of Boston.
  5. Mailath, George J, 1987. "Incentive Compatibility in Signaling Games with a Continuum of Types," Econometrica, Econometric Society, vol. 55(6), pages 1349-65, November.
  6. Paolo Naticchioni & Andrea Ricci & Emiliano Rustichelli, 2007. "Wage Structure, Inequality And Skill-Biased Change: Is Italy An Outlier?," Quaderni del Dipartimento di Economia, Finanza e Statistica 38/2007, Università di Perugia, Dipartimento Economia, Finanza e Statistica.
  7. Acemoglu, Daron & Aghion, Philippe & Zilibotti, Fabrizio, 2002. "Distance to Frontier, Selection, and Economic Growth," CEPR Discussion Papers 3467, C.E.P.R. Discussion Papers.
  8. Maarten Goos & Alan Manning, 2003. "Lousy and lovely jobs: the rising polarization of work in Britain," LSE Research Online Documents on Economics 20002, London School of Economics and Political Science, LSE Library.
  9. Aghion, Philippe, 2002. "Schumpeterian Growth Theory and the Dynamics of Income Inequality," Scholarly Articles 3350067, Harvard University Department of Economics.
  10. Giorgio Brunello & Lorenzo Cappellari, 2007. "The Labour Market Effects of Alma Mater: Evidence from Italy," "Marco Fanno" Working Papers 0040, Dipartimento di Scienze Economiche "Marco Fanno".
  11. Black, Dan A. & Smith, J.A.Jeffrey A., 2004. "How robust is the evidence on the effects of college quality? Evidence from matching," Journal of Econometrics, Elsevier, vol. 121(1-2), pages 99-124.
  12. Dolton, Peter & Vignoles, Anna, 2000. "The incidence and effects of overeducation in the U.K. graduate labour market," Economics of Education Review, Elsevier, vol. 19(2), pages 179-198, April.
  13. Carneiro, Pedro & Heckman, James J., 2002. "The Evidence on Credit Constraints in Post-Secondary Schooling," IZA Discussion Papers 518, Institute for the Study of Labor (IZA).
  14. In-Koo Cho & David M. Kreps, 1997. "Signaling Games and Stable Equilibria," Levine's Working Paper Archive 896, David K. Levine.
  15. Ordine, Patrizia & Rose, Giuseppe, 2008. "The supply of education quality in a spatial model with asymmetric moving costs," Research in Economics, Elsevier, vol. 62(4), pages 197-214, December.
  16. Maarten Goos & Alan Manning, 2003. "Lousy and Lovely Jobs: the Rising Polarization of Work in Britain," CEP Discussion Papers dp0604, Centre for Economic Performance, LSE.
  17. Michael Spence, 2002. "Signaling in Retrospect and the Informational Structure of Markets," American Economic Review, American Economic Association, vol. 92(3), pages 434-459, June.
  18. Dennis Epple & Richard Romano & Holger Sieg, 2006. "Admission, Tuition, and Financial Aid Policies in the Market for Higher Education," Econometrica, Econometric Society, vol. 74(4), pages 885-928, 07.
  19. Philippe Aghion, 2002. "Schumpeterian Growth Theory and the Dynamics of Income Inequality," Econometrica, Econometric Society, vol. 70(3), pages 855-882, May.
  20. Giorgio Di Pietro & Andrea Cutillo, 2006. "University Quality and Labour Market Outcomes in Italy," LABOUR, CEIS, vol. 20(1), pages 37-62, 03.
  21. Hartog, Joop, 2000. "Over-education and earnings: where are we, where should we go?," Economics of Education Review, Elsevier, vol. 19(2), pages 131-147, April.
  22. Juhn, Chinhui & Murphy, Kevin M & Pierce, Brooks, 1993. "Wage Inequality and the Rise in Returns to Skill," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 410-42, June.
  23. Seamus McGuinness, 2003. "University quality and labour market outcomes," Applied Economics, Taylor & Francis Journals, vol. 35(18), pages 1943-1955.
  24. Acemoglu, Daron, 1997. "Training and Innovation in an Imperfect Labour Market," Review of Economic Studies, Wiley Blackwell, vol. 64(3), pages 445-64, July.
  25. Gould, Eric D & Moav, Omer & Weinberg, Bruce A, 2001. " Precautionary Demand for Education, Inequality, and Technological Progress," Journal of Economic Growth, Springer, vol. 6(4), pages 285-315, December.
  26. Patrizia Ordine & Giuseppe Rose, 2009. "Overeducation and Instructional Quality: A Theoretical Model and Some Facts," Journal of Human Capital, University of Chicago Press, vol. 3(1), pages 73-105.
  27. Séamus McGuinness, 2006. "Overeducation in the Labour Market," Journal of Economic Surveys, Wiley Blackwell, vol. 20(3), pages 387-418, 07.
  28. Spence, A Michael, 1973. "Job Market Signaling," The Quarterly Journal of Economics, MIT Press, vol. 87(3), pages 355-74, August.
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Citations

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Cited by:
  1. Emanuela Ghignoni, 2011. "Young workers‟ overeducation and cohort effects in “P.I.G.S.†countries versus the Netherlands: a pseudo-panel analysis," Working Papers 147, University of Rome La Sapienza, Department of Public Economics.
  2. Patrizia Ordine & Giuseppe Rose, 2011. "Educational Mismatch and Wait Unemployment," Working Papers 19, AlmaLaurea Inter-University Consortium.
  3. Rose, Giuseppe, 2013. "Endogenous ranking in a two-sector urn-ball matching process," Economics Discussion Papers 2013-40, Kiel Institute for the World Economy.
  4. Giuseppe Croce & Emanuela Ghignoni, 2011. "Overeducation and spatial flexibility in Italian local labour markets," Working Papers 145, University of Rome La Sapienza, Department of Public Economics.
  5. Emanuela Ghignoni & Alina Verashchagina, 2012. "Educational qualifications mismatch in Europe Is it demand or supply driven?," Working Papers 154, University of Rome La Sapienza, Department of Public Economics.

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