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Overskilling Dynamics and Education Pathways

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Author Info

  • Kostas Mavromaras

    (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne and IZA, Bonn)

  • Seamus McGuinness

    (Economic and Social Research Institute, Dublin)

  • Yin King Fok

    (Melbourne Institute of Applied Economic and Social Research, The 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 Melbourne Institute of Applied Economic and Social Research, The University of Melbourne in its series Melbourne Institute Working Paper Series with number wp2009n22.

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Length: 21 pages
Date of creation: Jul 2009
Date of revision:
Handle: RePEc:iae:iaewps:wp2009n22

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Postal: Melbourne Institute of Applied Economic and Social Research, The University of Melbourne, Victoria 3010 Australia
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Keywords: Overskilling; education pathways; state dependence; dynamic estimation;

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References

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  1. Seamus McGuinness & Peter J. Sloane, 2009. "Labour Market Mismatch Among UK Graduates; An Analysis Using REFLEX Data," Papers, Economic and Social Research Institute (ESRI) WP294, Economic and Social Research Institute (ESRI).
  2. Frances Ruane & Xiaoheng Zhang, 2007. "Location Choices of the Pharmaceutical Industry in Europe after 1992," The Institute for International Integration Studies Discussion Paper Series, IIIS iiisdp220, IIIS.
  3. Francis Green & Yu Zhu, 2008. "Overqualification, Job Dissatisfaction, and Increasing Dispersion in the Returns to Graduate Education," Studies in Economics, Department of Economics, University of Kent 0803, Department of Economics, University of Kent.
  4. Mavromaras, Kostas G. & McGuinness, Seamus & O'Leary, Nigel C. & Sloane, Peter J. & Fok, Yin King, 2007. "The Problem of Overskilling in Australia and Britain," IZA Discussion Papers 3136, Institute for the Study of Labor (IZA).
  5. Mundlak, Yair, 1978. "On the Pooling of Time Series and Cross Section Data," Econometrica, Econometric Society, Econometric Society, vol. 46(1), pages 69-85, January.
  6. Oded Galor & Nachum Sicherman, 1988. "A Theory of Career Mobility," University of Chicago - George G. Stigler Center for Study of Economy and State, Chicago - Center for Study of Economy and State 51, Chicago - Center for Study of Economy and State.
  7. Wiji Arulampalam & Mark B. Stewart, 2009. "Simplified Implementation of the Heckman Estimator of the Dynamic Probit Model and a Comparison with Alternative Estimators," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 71(5), pages 659-681, October.
  8. James J. Heckman, 1981. "Heterogeneity and State Dependence," NBER Chapters, in: Studies in Labor Markets, pages 91-140 National Bureau of Economic Research, Inc.
  9. P. J. Sloane & H. Battu & P. T. Seaman, 1999. "Overeducation, undereducation and the British labour market," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 31(11), pages 1437-1453.
  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., John Wiley & Sons, Ltd., vol. 20(1), pages 39-54.
  11. McGuinness, Seamus & Wooden, Mark, 2007. "Overskilling, Job Insecurity and Career Mobility," IZA Discussion Papers 2938, Institute for the Study of Labor (IZA).
  12. Francis Green & Steven McIntosh, 2007. "Is there a genuine under-utilization of skills amongst the over-qualified?," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 39(4), pages 427-439.
  13. 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.
  14. Heckman, James J, 1991. "Identifying the Hand of the Past: Distinguishing State Dependence from Heterogeneity," American Economic Review, American Economic Association, American Economic Association, vol. 81(2), pages 75-79, May.
  15. Kostas Mavromaras & Seamus Mcguinness & Yin King Fok, 2009. "Assessing the Incidence and Wage Effects of Overskilling in the Australian Labour Market," The Economic Record, The Economic Society of Australia, The Economic Society of Australia, vol. 85(268), pages 60-72, 03.
  16. Seán Lyons & Karen Mayor & Richard S.J. Tol, 2008. "Environmental Accounts for the Republic of Ireland: 1990-2005," Papers, Economic and Social Research Institute (ESRI) WP223, Economic and Social Research Institute (ESRI).
  17. Séamus McGuinness, 2006. "Overeducation in the Labour Market," Journal of Economic Surveys, Wiley Blackwell, Wiley Blackwell, vol. 20(3), pages 387-418, 07.
  18. McGuinness, Seamus & Bennett, Jessica, 2007. "Overeducation in the graduate labour market: A quantile regression approach," Economics of Education Review, Elsevier, Elsevier, vol. 26(5), pages 521-531, October.
  19. Seamus McGuinness, 2003. "University quality and labour market outcomes," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 35(18), pages 1943-1955.
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Citations

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Cited by:
  1. Baert, Stijn & Cockx, Bart & Verhaest, Dieter, 2013. "Overeducation at the start of the career: Stepping stone or trap?," Labour Economics, Elsevier, Elsevier, vol. 25(C), pages 123-140.
  2. Bender, Keith A. & Roche, Kristen, 2013. "Educational mismatch and self-employment," Economics of Education Review, Elsevier, Elsevier, vol. 34(C), pages 85-95.
  3. Maite Bl�zquez & Santiago Budría, 2012. "Overeducation dynamics and personality," Education Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 20(3), pages 260-283, March.
  4. 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).
  5. Paula Herrera & Enrique López-Bazo & Elisabet Motellón, 2013. "“Informality and Overeducation in the Labor Market of a Developing Country”," AQR Working Papers, University of Barcelona, Regional Quantitative Analysis Group 201303, University of Barcelona, Regional Quantitative Analysis Group, revised Apr 2013.
  6. 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, Elsevier, vol. 32(C), pages 78-91.
  7. Kostas Mavromaras & Stéphane Mahuteau & Peter Sloane & Zhang Wei, 2013. "The effect of overskilling dynamics on wages," Education Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 21(3), pages 281-303, July.
  8. Piracha, Matloob & Vadean, Florin, 2012. "Migrant Educational Mismatch and the Labour Market," IZA Discussion Papers 6414, Institute for the Study of Labor (IZA).
  9. 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.

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