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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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    References listed on IDEAS

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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. 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. 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.
    4. 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).
    5. 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).

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    Keywords

    Overeducation; skills mismatch; wages; panel data analysis;
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