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Higher education expansion and unskilled labour market outcomes

  • Oppedisano, Veruska

The increasing demand for higher education reduces the supply and changes the composition of unskilled secondary school graduates, and it may therefore affect their labour market outcomes. However, there is little empirical evidence on these effects. This paper analyses a large-scale expansion of higher education supply in Italy, which occurred at the end of the 1990s, to estimate the effects of the policy on the secondary school graduates’ probability of being inactive, employed, unemployed, and on their wages. Robust difference-in-differences estimates show that the probability of being inactive decreases by 4.5 percent, as the policy significantly displaces individuals from inactivity. Those shifting across educational level have middle ability but favourable parental background, and would have worked in the family firm, or waited for a public competition had the expansion not took place, indicating that a new campus nearby induces mainly those with a low opportunity cost to enrol in university. Lack of significant effects on the labour market outcomes of the workforce provides evidence in favour of the human capital hypothesis. However, the policy may have induced too little variation in the workforce to distinguish between the human capital and signalling theory.

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Article provided by Elsevier in its journal Economics of Education Review.

Volume (Year): 40 (2014)
Issue (Month): C ()
Pages: 205-220

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Handle: RePEc:eee:ecoedu:v:40:y:2014:i:c:p:205-220
Contact details of provider: Web page: http://www.elsevier.com/locate/econedurev

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  2. Arnaud Chevalier & Joanne Lindley, 2007. "Over-education and the skills of UK graduates," LSE Research Online Documents on Economics 19397, London School of Economics and Political Science, LSE Library.
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  17. Ulla Hämäläinen & Roope Uusitalo, 2008. "Signalling or Human Capital: Evidence from the Finnish Polytechnic School Reform," Scandinavian Journal of Economics, Wiley Blackwell, vol. 110(4), pages 755-775, December.
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