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Is the Over-Education Wage Penalty Permanent?

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  • Joanne Lindley

    ()
    (Department of Economics, The University of Sheffield)

  • Steven McIntosh

    ()
    (Department of Economics, The University of Sheffield)

Abstract

Much has been written about the impact of over-education on wages using cross-sectional data, although there have been few studies that analyse the returns to over-education in a dynamic setting. This paper adds to the existing literature by using panel data to investigate the impact and permanence of over-education wage penalties, whilst controlling for unobserved individual heterogeneity. Our fixed effects estimates suggest that the over-education wage penalty cannot solely be explained by unobserved heterogeneity. Over-education is permanent for many workers since around 50 percent of workers over-educated in 1991 are still over-educated in 2005. However, we also show that these workers are of lower quality compared to around 25 percent who find a match within five years of being over-educated. Finally, there is a significant scarring effect for workers over-educated in 1991 since they never fully reach parity compared to those who were matched in 1991, although this is not the case for graduates who manage to find a match within 5 years.

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File URL: http://www.shef.ac.uk/economics/research/serps/articles/2010_004.html
File Function: First version, 2010
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Bibliographic Info

Paper provided by The University of Sheffield, Department of Economics in its series Working Papers with number 2010004.

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Length: 40 pages
Date of creation: Jan 2010
Date of revision: Jan 2010
Handle: RePEc:shf:wpaper:2010004

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Keywords: Over-education; Skills;

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Cited by:
  1. Blázquez, Maite & Budría, Santiago, 2011. "Overeducation Dynamics and Personality," Working Papers in Economic Theory 2011/05, Universidad Autónoma de Madrid (Spain), Department of Economic Analysis (Economic Theory and Economic History).
  2. Emanuela Ghignoni & Alina Verashchagina, 2012. "Educational qualifications mismatch in Europe Is it demand or supply driven?," Working Papers 154, University of Rome La Sapienza, Department of Public Economics.
  3. Aleksander Kucel & Montserrat Vilalta-Bufi, 2012. "Why do university graduates regret their study program? A comparison between Spain and the Netherlands," Working Papers in Economics 279, Universitat de Barcelona. Espai de Recerca en Economia.
  4. Marco PECORARO, 2011. "Is there still a wage penalty for being overeducated but well-matched in skills? A panel data analysis of a Swiss graduate cohort," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2011019, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).

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