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Is there still a wage penalty for being overeducated but well-matched in skills? A panel data analysis of a Swiss graduate cohort

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  • Marco PECORARO

    () (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES) and SFM, Université de Neuchâtel)

Abstract

Using two periods’ panel data from the Swiss Graduate Survey, this study examines the incidence and wage effects of overeducation. Contrary to most prior research, we account for graduate heterogeneity in perceived skills mismatch when measuring overeducation and correct for potential omitted ability bias in the estimated pay penalty associated with overeducation. We find that graduates who are overeducated and mismatched in skills (i.e. genuinely overeducated) are the most penalized in terms of earnings. This evidence is still valid when using the fixed effects approach, while the pay penalty is no more significant for graduates who are overeducated but matched in skills (i.e. apparently overeducated). This indicates that the wage effects for apparently overeducated graduates are mainly due to the omission of unobserved ability.

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  • Marco PECORARO, 2011. "Is there still a wage penalty for being overeducated but well-matched in skills? A panel data analysis of a Swiss graduate cohort," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2011019, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  • Handle: RePEc:ctl:louvir:2011019
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    1. repec:spr:soinre:v:132:y:2017:i:3:d:10.1007_s11205-016-1338-x is not listed on IDEAS
    2. Mateos-Romero, Lucía & Salinas Jiménez, María del Mar, 2015. "Skills heterogeneity among graduate workers: real and apparent overeducation in the Spanish labor market," MPRA Paper 64372, University Library of Munich, Germany.
    3. Cim, Merve & Kind, Michael Sebastian & Kleibrink, Jan, 2017. "Occupational mismatch of immigrants in Europe: The role of education and cognitive skills," Ruhr Economic Papers 687, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    4. 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.
    5. Floro Ernesto Caroleo & Francesco Pastore, 2012. "Overeducation at a glance. Determinants and wage effects of the educational mismatch, looking at the AlmaLaurea data," Discussion Papers 18_2012, CRISEI, University of Naples "Parthenope", Italy.
    6. Tani, Massimiliano, 2012. "Does immigration policy affect the education--occupation mismatch? Evidence from Australia," Australian Bulletin of Labour, National Institute of Labour Studies, vol. 38(2), pages 111-141.
    7. repec:spr:italej:v:3:y:2017:i:2:d:10.1007_s40797-017-0053-3 is not listed on IDEAS
    8. Gaeta, Giuseppe Lucio & Lubrano Lavadera, Giuseppe & Pastore, Francesco, 2016. "Much Ado About Nothing? The Wage Effect of Holding a Ph.D. Degree But Not a Ph.D. Job Position," IZA Discussion Papers 10051, Institute for the Study of Labor (IZA).
    9. Caroleo, Floro Ernesto & Pastore, Francesco, 2017. "Overeducation at a glance. Determinants and wage effects of the educational mismatch based on AlmaLaurea data," GLO Discussion Paper Series 15, Global Labor Organization (GLO).
    10. Sellami Sana & Verhaest Dieter & Nonneman Walter & Van Trier Walter, 2017. "The Impact of Educational Mismatches on Wages: The Influence of Measurement Error and Unobserved Heterogeneity," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 17(1), pages 1-20, February.
    11. Caroleo, Floro Ernesto & Pastore, Francesco, 2015. "Overeducation: A Disease of the School-to-Work Transition System," IZA Discussion Papers 9049, Institute for the Study of Labor (IZA).
    12. Gaeta, Giuseppe Lucio & Lubrano Lavadera, Giuseppe & Pastore, Francesco, 2018. "Overeducation wage penalty among Ph.D. holders. An unconditional quantile regression analysis on Italian data," GLO Discussion Paper Series 180, Global Labor Organization (GLO).
    13. Marco PECORARO, 2012. "The incidence and wage effects of overeducation using the worker’s self-assessment of skill utilization," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2012014, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).

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    Overeducation; skills mismatch; wages; panel data analysis;

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