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The effect of educational mismatch on wages in Europe

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  • Iriondo, Iñaki
  • Pérez-Amaral, Teodosio

Abstract

This paper analyzes the effect of educational mismatch on wages, using a rich panel dataset of workers in the major euro area countries from 2006 to 2009, drawn from the European Union Statistics on Income and Living Conditions (Eurostat). We use a consistent estimator to address the two econometric problems faced by the empirical literature: the omitted variable bias and measurement error. In principle, our fixed effect estimates confirm that overeducated workers suffer a wage penalty of similar magnitude to the return on each year of schooling attained. Interestingly, when we split the sample by age, we find that the wages of people aged under 35 basically depend on the level of education attained, while those of workers aged over 35 depend on job educational requirements. These results are interpreted taking into account the impact of the depreciation of skills on human capital. The main policy implication of the paper is that overeducation constitutes a waste of resources. Therefore public authorities should seek to reduce the negative impact of overeducation on the labor market.

Suggested Citation

  • Iriondo, Iñaki & Pérez-Amaral, Teodosio, 2016. "The effect of educational mismatch on wages in Europe," Journal of Policy Modeling, Elsevier, vol. 38(2), pages 304-323.
    • Handle: RePEc:eee:jpolmo:v:38:y:2016:i:2:p:304-323
    DOI: 10.1016/j.jpolmod.2015.12.008
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    2. Sandra Nieto & Raul Ramos, 2017. "Overeducation, Skills and Wage Penalty: Evidence for Spain Using PIAAC Data," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 134(1), pages 219-236, October.
    3. Francis Green & Golo Henseke, 2021. "Europe’s evolving graduate labour markets: supply, demand, underemployment and pay," Journal for Labour Market Research, Springer;Institute for Employment Research/ Institut für Arbeitsmarkt- und Berufsforschung (IAB), vol. 55(1), pages 1-13, December.
    4. Joaquin Turmo-Garuz & M.-Teresa Bartual-Figueras & Francisco-Javier Sierra-Martinez, 2019. "Factors Associated with Overeducation Among Recent Graduates During Labour Market Integration: The Case of Catalonia (Spain)," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 144(3), pages 1273-1301, August.
    5. Mateos Romero, Lucía & Murillo Huertas, Inés P. & Salinas Jiménez, Mª del Mar, 2017. "Wage effects of cognitive skills and educational mismatch in Europe," Journal of Policy Modeling, Elsevier, vol. 39(5), pages 909-927.
    6. Balzhan Serikbayeva & Kanat Abdulla, 2022. "Education-Job Mismatch: Implications for Individual Earnings and Aggregate Output," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 163(2), pages 723-752, September.
    7. Mariia Vasiakina & Silvana Robone, 2018. "Education-job mismatch as a determinant of health: evidence from the Russian Federation," RIEDS - Rivista Italiana di Economia, Demografia e Statistica - The Italian Journal of Economic, Demographic and Statistical Studies, SIEDS Societa' Italiana di Economia Demografia e Statistica, vol. 72(4), pages 101-111, October-D.
    8. Laszlo Gadar & Janos Abonyi, 2018. "Graph configuration model based evaluation of the education-occupation match," PLOS ONE, Public Library of Science, vol. 13(3), pages 1-19, March.
    9. Garcia-Mainar, Inmaculada & Montuenga, Victor M., 2019. "The signalling role of over-education and qualifications mismatch," Journal of Policy Modeling, Elsevier, vol. 41(1), pages 99-119.
    10. Berhe Mekonnen Beyene and & Tsegay Gebrekidan Tekleselassie, 2018. "The State, Determinants, and Consequences of Skills Mismatch in the Ethiopian Labour Market," Working Papers 021, Policy Studies Institute.
    11. Wen, Le & Maani, Sholeh A., 2023. "Earnings Penalty of Educational Mismatch: A Comparison of Alternative Methods of Assessing Over-Education," IZA Discussion Papers 15943, Institute of Labor Economics (IZA).

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    More about this item

    Keywords

    Overeducation; Educational mismatch; Wages; Ability bias; Panel data;
    All these keywords.

    JEL classification:

    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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