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“Overeducation, skills and wage penalty: Evidence for Spain using PIAAC data”

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  • Sandra Nieto

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    (Faculty of Economics, University of Barcelona)

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    Abstract

    The literature on educational mismatches finds that overeducated workers suffer a wage penalty compared with properly educated workers with the same level of education. Recent literature also suggests that individuals’ skill heterogeneity could explain wage differences between overeducated and properly matched workers. The hypothesis is that overeducated workers earn less due to their lower competences and skills in relative terms. However, that hypothesis has been rarely tested due to data limitations on individuals’ skills. The aim of this paper is to test the individuals’ skill heterogeneity theory in Spain using microdata from PIAAC, because it is one of the developed countries supporting the highest overeducation rates and where its adult population holds the lowest level of skills among a set of developed countries. Our hypothesis is that the wage penalty of overeducation in Spain is explained by the lower skill level of overeducated workers. The obtained evidence confirms this hypothesis but only to a certain extent as skills only explain partially the wage penalty of overeducation.

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    File URL: http://www.ub.edu/irea/working_papers/2014/201411.pdf
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    Bibliographic Info

    Paper provided by University of Barcelona, Regional Quantitative Analysis Group in its series AQR Working Papers with number 201406.

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    Length: 29 pages
    Date of creation: Mar 2014
    Date of revision: Mar 2014
    Handle: RePEc:aqr:wpaper:201406

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    Related research

    Keywords: overeducation; individual’s skill heterogeneity; wages JEL classification: J31; I21; C13;

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    1. Sandra Nieto & Raúl Ramos, 2013. "Non-Formal Education, Overeducation And Wages," Revista de Economia Aplicada, Universidad de Zaragoza, Departamento de Estructura Economica y Economia Publica, vol. 21(1), pages 5-28, Spring.
    2. Mavromaras, Kostas & McGuinness, Seamus & O?Leary, Nigel & Sloane, Peter & Fok, Yin King, 2009. "Job Mismatches and Labour Market Outcomes," Papers WP314, Economic and Social Research Institute (ESRI).
    3. Michele Pellizzari & Anne Fichen, 2013. "A New Measure of Skills Mismatch: Theory and Evidence from the Survey of Adult Skills (PIAAC)," OECD Social, Employment and Migration Working Papers 153, OECD Publishing.
    4. Di Pietro, Giorgio & Peter Urwin, 2003. "Education and Skills Mismatch in the Italian Graduate Labour Market," Royal Economic Society Annual Conference 2003 59, Royal Economic Society.
    5. Allen, Jim & van der Velden, Rolf, 2001. "Educational Mismatches versus Skill Mismatches: Effects on Wages, Job Satisfaction, and On-the-Job Search," Oxford Economic Papers, Oxford University Press, vol. 53(3), pages 434-52, July.
    6. Jacob A. Mincer, 1974. "Introduction to "Schooling, Experience, and Earnings"," NBER Chapters, in: Schooling, Experience, and Earnings, pages 1-4 National Bureau of Economic Research, Inc.
    7. Verhaest Dieter & Velden Rolf van der, 2010. "Cross-country differences in graduate overeducation and its persistence," ROA Research Memorandum 007, Maastricht University, Research Centre for Education and the Labour Market (ROA).
    8. Jacob A. Mincer, 1974. "Schooling, Experience, and Earnings," NBER Books, National Bureau of Economic Research, Inc, number minc74-1, July.
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