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Overskilling Dynamics and Education Pathways

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Author Info
Mavromaras, Kostas G. () (University of Melbourne)
McGuinness, Seamus () (Economic and Social Research Institute, Dublin)
Fok, Yin King () (University of Melbourne)

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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 alternative and useful perspective to compare the attributes of vocational and degree qualifications.

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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4321.

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Length: 20 pages
Date of creation: Jul 2009
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Handle: RePEc:iza:izadps:dp4321

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Related research
Keywords: overskilling; education pathways; state dependence; dynamic estimation;

Other versions of this item:

Find related papers by JEL classification:
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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References listed on IDEAS
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  1. Seamus McGuinness & Mark Wooden, 2007. "Overskilling, Job Insecurity and Career Mobility," IZA Discussion Papers 2938, Institute for the Study of Labor (IZA). [Downloadable!]
  2. 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, vol. 85(268), pages 60-72, 03. [Downloadable!] (restricted)
    Other versions:
  3. John Cullinan & Gannon, Brenda & Seán Lyons, 2008. "Estimating the Economic Cost of Disability in Ireland," Papers WP230, Economic and Social Research Institute (ESRI). [Downloadable!]
  4. 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. [Downloadable!]
  5. Sloane, P J & Battu, H & Seaman, P T, 1999. "Overeducation, Undereducation and the British Labour Market," Applied Economics, Taylor and Francis Journals, vol. 31(11), pages 1437-53, November. [Downloadable!] (restricted)
  6. Kostas Mavromaras & Seamus McGuinness & Nigel O’Leary & Peter Sloane & Yin King Fok, 2007. "The Problem of Overskilling in Australia and Britain," Melbourne Institute Working Paper Series wp2007n33, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne. [Downloadable!]
    Other versions:
  7. 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). [Downloadable!]
  8. Seamus McGuinness & Frances McGinnity & Philip J. O'Connell, 2008. "Changing Returns to Education During a Boom? The Case of Ireland," Papers WP227, Economic and Social Research Institute (ESRI). [Downloadable!]
    Other versions:
  9. 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. [Downloadable!] (restricted)
  10. Seán Lyons & Karen Mayor & Richard S. J. Tol, 2008. "The Climate Preferences of Irish Tourists by Purpose of Travel," Papers WP225, Economic and Social Research Institute (ESRI). [Downloadable!]
  11. Séamus McGuinness, 2006. "Overeducation in the Labour Market," Journal of Economic Surveys, Blackwell Publishing, vol. 20(3), pages 387-418, 07. [Downloadable!] (restricted)
  12. James J. Heckman, 1981. "Heterogeneity and State Dependence," NBER Chapters, in: Studies in Labor Markets, pages 91-140 National Bureau of Economic Research, Inc. [Downloadable!]
  13. Seán Lyons & Karen Mayor & Richard S.J. Tol, 2007. "Holiday Destinations: Understanding the Travel Choices of Irish," Papers WP210, Economic and Social Research Institute (ESRI). [Downloadable!]
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