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Overskilling Dynamics and Education Pathways

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  • Mavromaras, Kostas

    (University of Melbourne)

  • McGuinness, Seamus

    (ESRI)

  • Fok, Yin King

    (University of Melbourne)

Abstract

This paper uses panel data and econometric methods to estimate the incidence and the dynamic properties of overskilling among employed individuals. The paper begins by asking whether there is extensive overskilling in the labour market, and whether overskilling differs by education pathway. The answer to both questions is yes. The paper continues by asking whether overskilling is a self-perpetuating labour market state (state dependence), and whether state dependence differs by education pathway. The paper uses a dynamic random effects probit which includes Mundlak corrections and it models the initial conditions following Heckman's method. It finds that there is extensive overskilling state dependence in the workplace, and to the degree that overskilling can be interpreted as skills underutilisation and worker-job mismatch, this is an important finding. Overskilled workers with a higher degree show the highest state dependence, while workers with vocational education show none. Workers with no post-school qualifications are somewhere between these two groups. The finding that higher degree graduates suffer the greatest overskilling state dependence, combined with the well-established finding that they also suffer the highest overskilling wage penalty, offers an additional useful perspective to compare the attributes of vocational and degree qualifications.

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Bibliographic Info

Paper provided by Economic and Social Research Institute (ESRI) in its series Papers with number WP307.

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Date of creation: Aug 2009
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Handle: RePEc:esr:wpaper:wp307

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References

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  1. Francis Green & Yu Zhu, 2010. "Overqualification, job dissatisfaction, and increasing dispersion in the returns to graduate education," Oxford Economic Papers, Oxford University Press, vol. 62(4), pages 740-763, October.
  2. Mavromaras, Kostas G. & McGuinness, Seamus & Fok, Yin King, 2007. "Assessing the Incidence and Wage Effects of Over-Skilling in the Australian Labour Market," IZA Discussion Papers 2837, Institute for the Study of Labor (IZA).
  3. Seamus McGuinness & Peter J. Sloane, 2009. "Labour Market Mismatch Among UK Graduates; An Analysis Using REFLEX Data," Papers WP294, Economic and Social Research Institute (ESRI).
  4. Francis Green & Steven McIntosh, 2007. "Is there a genuine under-utilization of skills amongst the over-qualified?," Applied Economics, Taylor & Francis Journals, vol. 39(4), pages 427-439.
  5. Séamus McGuinness, 2006. "Overeducation in the Labour Market," Journal of Economic Surveys, Wiley Blackwell, vol. 20(3), pages 387-418, 07.
  6. James J. Heckman, 1981. "Heterogeneity and State Dependence," NBER Chapters, in: Studies in Labor Markets, pages 91-140 National Bureau of Economic Research, Inc.
  7. P. J. Sloane & H. Battu & P. T. Seaman, 1999. "Overeducation, undereducation and the British labour market," Applied Economics, Taylor & Francis Journals, vol. 31(11), pages 1437-1453.
  8. Kostas Mavromaras & Seamus Mcguinness & Nigel O'Leary & Peter Sloane & Yi King Fok, 2010. "The Problem Of Overskilling In Australia And Britain," Manchester School, University of Manchester, vol. 78(3), pages 219-241, 06.
  9. McGuinness, Seamus & Bennett, Jessica, 2007. "Overeducation in the graduate labour market: A quantile regression approach," Economics of Education Review, Elsevier, vol. 26(5), pages 521-531, October.
  10. Jeffrey M. Wooldridge, 2005. "Simple solutions to the initial conditions problem in dynamic, nonlinear panel data models with unobserved heterogeneity," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(1), pages 39-54.
  11. Sicherman, Nachum & Galor, Oded, 1990. "A Theory of Career Mobility," Journal of Political Economy, University of Chicago Press, vol. 98(1), pages 169-92, February.
  12. McGuinness, Seamus & Wooden, Mark, 2007. "Overskilling, Job Insecurity and Career Mobility," IZA Discussion Papers 2938, Institute for the Study of Labor (IZA).
  13. Seán Lyons & Karen Mayor & Richard S.J. Tol, 2008. "Environmental Accounts for the Republic of Ireland: 1990-2005," Papers WP223, Economic and Social Research Institute (ESRI).
  14. Seamus McGuinness, 2003. "University quality and labour market outcomes," Applied Economics, Taylor & Francis Journals, vol. 35(18), pages 1943-1955.
  15. Heckman, James J, 1991. "Identifying the Hand of the Past: Distinguishing State Dependence from Heterogeneity," American Economic Review, American Economic Association, vol. 81(2), pages 75-79, May.
  16. Mundlak, Yair, 1978. "On the Pooling of Time Series and Cross Section Data," Econometrica, Econometric Society, vol. 46(1), pages 69-85, January.
  17. 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.
  18. Arulampalam, Wiji & Stewart, Mark, 2007. "Simplified Implementation of the Heckman Estimator of the Dynamic Probit Model and a Comparison with Alternative Estimators," IZA Discussion Papers 3039, Institute for the Study of Labor (IZA).
  19. Frances Ruane & Xiaoheng Zhang, 2007. "Location Choices of the Pharmaceutical Industry in Europe after 1992," The Institute for International Integration Studies Discussion Paper Series iiisdp220, IIIS.
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Citations

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Cited by:
  1. S. Baert & B. Cockx & D. Verhaest, 2012. "Overeducation at the start of the career - stepping stone or trap?," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 12/787, Ghent University, Faculty of Economics and Business Administration.
  2. Mavromaras, Kostas G. & Sloane, Peter J. & Wei, Zhang, 2013. "The Scarring Effects of Unemployment, Low Pay and Skills Under-utilisation in Australia Compared," IZA Discussion Papers 7440, Institute for the Study of Labor (IZA).
  3. Maite Bl�zquez & Santiago Budría, 2012. "Overeducation dynamics and personality," Education Economics, Taylor & Francis Journals, vol. 20(3), pages 260-283, March.
  4. Piracha, Matloob & Vadean, Florin, 2012. "Migrant Educational Mismatch and the Labour Market," IZA Discussion Papers 6414, Institute for the Study of Labor (IZA).
  5. Paula Herrera & Enrique López-Bazo & Elisabet Motellón, 2013. "“Informality and Overeducation in the Labor Market of a Developing Country”," IREA Working Papers 201305, University of Barcelona, Research Institute of Applied Economics, revised Apr 2013.
  6. Mavromaras, Kostas G. & Mahuteau, Stéphane & Sloane, Peter J. & Wei, Zhang, 2012. "The Effect of Overskilling Dynamics on Wages," IZA Discussion Papers 6985, Institute for the Study of Labor (IZA).
  7. Andersson Joona, Pernilla & Datta Gupta, Nabanita & Wadensjö, Eskil, 2012. "Overeducation among Immigrants in Sweden: Incidence, Wage Effects and State-dependence," SULCIS Working Papers 2012:2, Stockholm University Linnaeus Center for Integration Studies - SULCIS.
  8. Bender, Keith A. & Roche, Kristen, 2013. "Educational mismatch and self-employment," Economics of Education Review, Elsevier, vol. 34(C), pages 85-95.
  9. Kiersztyn, Anna, 2013. "Stuck in a mismatch? The persistence of overeducation during twenty years of the post-communist transition in Poland," Economics of Education Review, Elsevier, vol. 32(C), pages 78-91.

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