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How biased are the estimated wage impacts of overeducation? A propensity score matching approach


  • Seamus McGuinness


This article uses Propensity Score Matching (PSM) techniques to assess the extent to which the costs of overeducation are likely to have been over-estimated as a result of unobserved skill heterogeneity in studies adopting the standard ordinary least squares (OLS) wage equation framework. It was found that the PSM estimates were very much in line with those generated by OLS, suggesting that the overeducation phenomenon is likely to be imposing real and significant wage and productivity costs on individuals and the economy more generally and therefore cannot be dismissed as merely arising as a result of an omitted variables problem.

Suggested Citation

  • Seamus McGuinness, 2007. "How biased are the estimated wage impacts of overeducation? A propensity score matching approach," Applied Economics Letters, Taylor & Francis Journals, vol. 15(2), pages 145-149.
  • Handle: RePEc:taf:apeclt:v:15:y:2007:i:2:p:145-149 DOI: 10.1080/13504850600721999

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    References listed on IDEAS

    1. Emek Basker, 2005. "Job Creation or Destruction? Labor Market Effects of Wal-Mart Expansion," The Review of Economics and Statistics, MIT Press, vol. 87(1), pages 174-183, February.
    2. Basker, Emek, 2005. "Selling a cheaper mousetrap: Wal-Mart's effect on retail prices," Journal of Urban Economics, Elsevier, vol. 58(2), pages 203-229, September.
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    Cited by:

    1. Nader Habibi & GholamReza Keshavarz Haddad, 2016. "Why the Youth Are so Eager for Academic Education? Evidence from Iran's Labor Market," Working Papers 105, Brandeis University, Department of Economics and International Businesss School.
    2. repec:taf:edecon:v:25:y:2017:i:5:p:462-481 is not listed on IDEAS
    3. Nuria Sánchez-Sánchez & Seamus McGuinness, 2015. "Decomposing the impacts of overeducation and overskilling on earnings and job satisfaction: an analysis using REFLEX data," Education Economics, Taylor & Francis Journals, vol. 23(4), pages 419-432, August.
    4. Aydede, Yigit & Dar, Atul A., 2015. "The Cost of Vertical Mismatch in Canadian Labour Markets: How Big is It?," CLSSRN working papers clsrn_admin-2015-13, Vancouver School of Economics, revised 07 Jul 2015.
    5. Lamo, Ana & Messina, Julián, 2010. "Formal education, mismatch and wages after transition: Assessing the impact of unobserved heterogeneity using matching estimators," Economics of Education Review, Elsevier, vol. 29(6), pages 1086-1099, December.
    6. Kostas Mavromaras & Seamus Mcguinness & Yin King Fok, 2009. "Assessing the Incidence and Wage Effects of Overskilling in the Australian Labour Market," The Economic Record, The Economic Society of Australia, vol. 85(268), pages 60-72, March.
    7. Giuseppe Lucio Gaeta & Giuseppe Lubrano Lavadera & Francesco Pastore, 2017. "Much Ado about Nothing? The Wage Penalty of Holding a PhD Degree but Not a PhD Job Position," Research in Labor Economics,in: Skill Mismatch in Labor Markets, volume 45, pages 243-277 Emerald Publishing Ltd.
    8. Seamus McGuinness & Delma Byrne, 2015. "Born abroad and educated here: examining the impacts of education and skill mismatch among immigrant graduates in Europe," IZA Journal of Migration, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-30, December.
    9. Orbay, Benan & Aydede, Yigit, 2015. "Educational mismatch and the cost of underutilization in Turkish labour markets," MPRA Paper 65713, University Library of Munich, Germany.
    10. Eleni Kalfa & Matloob Piracha, 2017. "Immigrants’ educational mismatch and the penalty of over-education," Education Economics, Taylor & Francis Journals, vol. 25(5), pages 462-481, September.

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