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Nash bargaining and the wage consequences of educational mismatches


  • Sattinger, Michael
  • Hartog, Joop


The paper provides a theoretical foundation for the empirical regularities observed in estimations of wage consequences of overeducation and undereducation. Workers with more education than required for their jobs are observed to suffer wage penalties relative to workers with the same education in jobs that require their educational level. Similarly, workers with less education than required for their jobs earn wage rewards. These departures from the Mincer human capital earnings function can be explained by Nash bargaining between workers and employers. Under fairly mild assumptions, Nash bargaining predicts a wage penalty for overeducation and a wage reward for undereducation. This paper reviews the established empirical regularities and then provides Nash bargaining results that explain these regularities.

Suggested Citation

  • Sattinger, Michael & Hartog, Joop, 2013. "Nash bargaining and the wage consequences of educational mismatches," Labour Economics, Elsevier, vol. 23(C), pages 50-56.
  • Handle: RePEc:eee:labeco:v:23:y:2013:i:c:p:50-56
    DOI: 10.1016/j.labeco.2013.03.002

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    References listed on IDEAS

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    Cited by:

    1. Kampelmann, Stephan & Mahy, Benoît & Rycx, Francois & Vermeylen, Guillaume, 2016. "Who Is Your Perfect Match? Educational Norms, Educational Mismatch and Firm Profitability," IZA Discussion Papers 10399, Institute for the Study of Labor (IZA).
    2. Benoît Mahy & François Rycx & Guillaume Vermeylen, 2015. "Educational Mismatch and Firm Productivity: Do Skills, Technology and Uncertainty Matter?," De Economist, Springer, vol. 163(2), pages 233-262, June.
    3. repec:spr:jknowl:v:8:y:2017:i:2:d:10.1007_s13132-016-0434-0 is not listed on IDEAS
    4. Seamus McGuinness & Konstantinos Pouliakas, 2017. "Deconstructing Theories of Overeducation in Europe: A Wage Decomposition Approach," Research in Labor Economics,in: Skill Mismatch in Labor Markets, volume 45, pages 81-127 Emerald Publishing Ltd.

    More about this item


    Overeducation; Undereducation; Nash bargaining; Qualitative mismatches; Mincer earnings function; Wages;

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation


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