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Overeducation and skill-biased technical change

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  • Cuadras-Morató Xavier

    (Universitat Pompeu Fabra and Barcelona GSE, Economics and Business, Ramon Trias Fargas, 25-27 Barcelona 08015, Spain)

  • Mateos-Planas Xavier

    (Queen Mary University of London, School of Economics and Finance, Mile End Road, London E14NS, UK)

Abstract

There is evidence that rising overeducation has coincided with rapid skill-biased technical change (SBTC). This paper shows that a SBTC can cause a rise in overeducation as firms looking for educated workers become more selective and turn down the less skilled candidates. This result, while consistent with the evidence, is in contrast with the implications of recent search and matching models of the labor market. Here we present a model of a segmented labor market, with imperfect correlation between the individual ability and the observed education of workers, and a fixed cost of setting up a job. A numerical illustration for the US in the period 1970–1990 demonstrates that overeducation rises and that it can in turn be significant for the response of unemployment rates and wage inequality to a SBTC.

Suggested Citation

  • Cuadras-Morató Xavier & Mateos-Planas Xavier, 2013. "Overeducation and skill-biased technical change," The B.E. Journal of Macroeconomics, De Gruyter, vol. 13(1), pages 105-122, September.
    • Handle: RePEc:bpj:bejmac:v:13:y:2013:i:1:p:18:n:21
    DOI: 10.1515/bejm-2013-0020
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    References listed on IDEAS

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