A Mismatch Made in Heaven: A Hedonic Analysis of Overeducation and Undereducation
AbstractPrior work suggests coordination failure between labour and education markets leads some workers to have educational qualifications in excess of those specified for the job (overeducation) and others to have less (undereducation). This paper empirically models and tests the hypothesis that overeducation and undereducation arise out of a hedonic matching process that maximises net benefits to workers and firms over the life of the match. Specifically, the overeducated begin in low-paying, entry-level jobs early in their careers that prepare them for higher-paying future positions that require their educational background, whereas the undereducated start in lower-paying, exactly-educated jobs that can signal skills necessary for promotion. The empirical model shows that, because all workers are exactly-educated during at least a portion of their career, the type of educational match cannot be directly identified using a cross-section, but may be imputed from the differences between predicted and observed qualifications of the worker and predicted and observed requirements of the firm. The empirical analysis uses a rich cross-section of British working-age males to identify match types. Using contemporaneous, forward- and backward-looking data, we confirm that over and undereducated matches differ in their on-the-job training and promotion opportunities, which yield a trade-off in the pre- versus post-match return to human capital.
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Bibliographic InfoPaper provided by University of Oregon Economics Department in its series University of Oregon Economics Department Working Papers with number 2004-1.
Date of creation: 01 Dec 2003
Date of revision: 01 Dec 2003
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Other versions of this item:
- Daniel P. McMillen & Paul T. Seaman & Larry D. Singell Jr, 2007. "A Mismatch Made in Heaven: A Hedonic Analysis of Overeducation and Undereducation," Southern Economic Journal, Southern Economic Association, vol. 73(4), pages 901â930, April.
- 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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- D. Verhaest & E. Omey, 2012.
"The relationship between formal education and skill acquisition in young workers’ first jobs,"
Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium
12/768, Ghent University, Faculty of Economics and Business Administration.
- Dieter Verhaest & Eddy Omey, 2013. "The Relationship Between Formal Education And Skill Acquisition In Young Workers' First Jobs," Manchester School, University of Manchester, vol. 81(4), pages 638-659, 07.
- Verhaest, Dieter & Omey, Eddy, 2009. "The relation between formal education and skill acquisition in young workers first job," Working Papers 2009/07, Hogeschool-Universiteit Brussel, Faculteit Economie en Management.
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