The effects of overeducation on wage distribution in Trinidad and Tobago: an unconditional quantile regression analysis

There is a large literature on overeducation in developed countries, but the evidence in developing countries is still scant. Using data from the Continuous Sample Survey of Population for the period 1991–2015, we apply the Recentred Influence Function (RIF) method, to examine if and to what extent overeducation affects income inequality in Trinidad and Tobago. The results highlight that overeducation has a positive effect on mean income, while it reduces income inequality, measured by both Gini and Atkinson indexes. The results reveal that if the proportion of overeducated workers were to increase, then this would increase the returns of overeducated workers by 29.5% on average. Such a wage premium is higher for low deciles and lower in the middle of the income distribution. With the inclusion of skill and geographic location covariates, there is a substantial rise in their earnings. This shift in earnings tends to favor overeducated workers who are married, younger, i.e., in the 25–35 age group, and are highly skilled. The Inverse Probability Weighting (IPW) approach reveals that our results are not significantly distorted by a selection bias, thus corroborating the evidence obtained through the RIF method.