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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.

Suggested Citation

  • 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," LIDAM Discussion Papers IRES 2011019, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  • Handle: RePEc:ctl:louvir:2011019
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    Cited by:

    1. 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.
    2. Philipp Grunau & Marco Pecoraro, 2017. "Educational mismatch and promotions to managerial positions: a test of the career mobility theory," Applied Economics, Taylor & Francis Journals, vol. 49(12), pages 1226-1240, March.
    3. Wanner, Philippe & Pecoraro, Marco & Tani, Massimiliano, 2021. "Does Educational Mismatch Affect Emigration Behaviour?," IZA Discussion Papers 14558, Institute of Labor Economics (IZA).
    4. Floro Ernesto Caroleo & Francesco Pastore, 2018. "Overeducation at a Glance. Determinants and Wage Effects of the Educational Mismatch Based on AlmaLaurea Data," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 137(3), pages 999-1032, June.
    5. 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.
    6. Stijn Baert & Dieter Verhaest, 2019. "Unemployment or Overeducation: Which is a Worse Signal to Employers?," De Economist, Springer, vol. 167(1), pages 1-21, March.
    7. 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).
    8. Doon, Roshnie, 2021. "Overeducation in Trinidad and Tobago's Labour Market: A Quantile Regression Approach," GLO Discussion Paper Series 822, Global Labor Organization (GLO).
    9. Tinh Doan & Quan Le & Tuyen Quang Tran, 2018. "Lost in Transition? Declining Returns to Education in Vietnam," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 30(2), pages 195-216, April.
    10. Kihong Park & Dooseok Jang, 2017. "The Wage Effects Of Over-Education Among Young Stem Graduates," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 64(05), pages 1351-1370, June.
    11. 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.
    12. 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: Solomon W. Polachek & Konstantinos Pouliakas & Giovanni Russo & Konstantinos Tatsiramos (ed.), Skill Mismatch in Labor Markets, volume 45, pages 243-277, Emerald Publishing Ltd.
    13. Yi Zhang & Martin Salm & Arthur Soest, 2021. "The effect of training on workers’ perceived job match quality," Empirical Economics, Springer, vol. 60(5), pages 2477-2498, May.
    14. 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 of Labor Economics (IZA).
    15. Merve Cim & Michael Kind & Jan Kleibrink, 2020. "Occupational mismatch of immigrants in Europe: the role of education and cognitive skills," Education Economics, Taylor & Francis Journals, vol. 28(1), pages 96-112, January.
    16. Kihong Park, 2018. "Vertical and horizontal mismatches and career mobility: evidence from female college graduates," Asian-Pacific Economic Literature, Asia Pacific School of Economics and Government, The Australian National University, vol. 32(2), pages 109-125, November.
    17. 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.
    18. Marco PECORARO, 2012. "The incidence and wage effects of overeducation using the worker’s self-assessment of skill utilization," LIDAM Discussion Papers IRES 2012014, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    19. Lucía Mateos-Romero & María del Mar Salinas-Jiménez, 2017. "Skills Heterogeneity Among Graduate Workers: Real and Apparent Overeducation in the Spanish Labor Market," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 132(3), pages 1247-1264, July.
    20. Barbara Ermini & Luca Papi & Francesca Scaturro, 2017. "An Analysis of the Determinants of Over-Education Among Italian Ph.D Graduates," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 3(2), pages 167-207, July.
    21. Juan Acosta-Ballesteros & María del Pilar Osorno-del Rosal & Olga María Rodríguez-Rodríguez, 2018. "Overeducation of Young Workers in Spain: How Much Does the First Job Matter? Social Indicators Research," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 138(1), pages 109-139, July.
    22. Caroleo, Floro Ernesto & Pastore, Francesco, 2015. "Overeducation: A Disease of the School-to-Work Transition System," IZA Discussion Papers 9049, Institute of Labor Economics (IZA).
    23. Â Blagica Petreski & Â Jorge Davalos & Â Ivan Vchkov & Â Despina Tumanoska & Â Terez? Ko?ovska, 2019. "Analysis of youth underemployment in North Macedonia, Montenegro and Serbia," Finance Think Policy Studies 2019-03/22, Finance Think - Economic Research and Policy Institute.

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    Overeducation; skills mismatch; wages; panel data analysis;
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