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Causal Effects of Educational Mismatch in the Labor Market

  • Jan Kleibrink

This paper analyzes the effect of educational mismatch on wages in Germany, using data from the German Socio-Economic Panel. Educational mismatch has been discussed extensively, mostly by applying OLS wage regressions which are prone to an unobserved heterogeneity bias. This problem is approached by using FE and IV models. As a stability check, the regressions are rerun using data from the International Adult Literacy Survey, allowing for an explicit control of skills as proxy of abilities. Results show that unobserved heterogeneity does not explain the wage diff erences between actual years of education and years of required education. This rejects the hypothesis that mismatched workers compensate for heterogeneity in innate abilities. The results suggest a structural problem in the German educational system as skill demand and supply are not in long-term equilibrium.

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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.425555.de/diw_sp0571.pdf
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Paper provided by DIW Berlin, The German Socio-Economic Panel (SOEP) in its series SOEPpapers on Multidisciplinary Panel Data Research with number 571.

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Length: 27 p.
Date of creation: 2013
Date of revision:
Handle: RePEc:diw:diwsop:diw_sp571
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  1. Joshua D. Angrist & Alan B. Krueger, 1990. "Does Compulsory School Attendance Affect Schooling and Earnings?," NBER Working Papers 3572, National Bureau of Economic Research, Inc.
  2. Duncan, Greg J. & Hoffman, Saul D., 1981. "The incidence and wage effects of overeducation," Economics of Education Review, Elsevier, vol. 1(1), pages 75-86, February.
  3. Nachum Sicherman, 1987. "Over-Education in the Labor Market," University of Chicago - George G. Stigler Center for Study of Economy and State 48, Chicago - Center for Study of Economy and State.
  4. Groeneveld, Sandra & Hartog, Joop, 2003. "Overeducation, Wages and Promotions within the Firm," IZA Discussion Papers 883, Institute for the Study of Labor (IZA).
  5. David Card, 1993. "Using Geographic Variation in College Proximity to Estimate the Return to Schooling," Working Papers 696, Princeton University, Department of Economics, Industrial Relations Section..
  6. Korpi, Tomas & Tåhlin, Michael, 2009. "Educational mismatch, wages, and wage growth: Overeducation in Sweden, 1974-2000," Labour Economics, Elsevier, vol. 16(2), pages 183-193, April.
  7. Mincer, Jacob, 1970. "The Distribution of Labor Incomes: A Survey with Special Reference to the Human Capital Approach," Journal of Economic Literature, American Economic Association, vol. 8(1), pages 1-26, March.
  8. Russell W. Rumberger, 1987. "The Impact of Surplus Schooling on Productivity and Earnings," Journal of Human Resources, University of Wisconsin Press, vol. 22(1), pages 24-50.
  9. Kiker, B. F. & Santos, Maria C. & de Oliveira, M. Mendes, 1997. "Overeducation and undereducation: Evidence for Portugal," Economics of Education Review, Elsevier, vol. 16(2), pages 111-125, April.
  10. Bauer, Thomas K., 2002. "Educational mismatch and wages: a panel analysis," Economics of Education Review, Elsevier, vol. 21(3), pages 221-229, June.
  11. Battu, H. & Belfield, C. R. & Sloane, P. J., . "Overeducation Among Graduates: A Cohort View," Working Papers 98-03, Department of Economics, University of Aberdeen.
  12. John P. Haisken-DeNew & Markus H. Hahn, 2010. "PanelWhiz - Efficient Data Extraction of Complex Panel Data Sets: An Example Using the German SOEP," Data Documentation 53, DIW Berlin, German Institute for Economic Research.
  13. Colm Harmon & Hessel Oosterbeek & Ian Walker, 2003. "The Returns to Education: Microeconomics," Journal of Economic Surveys, Wiley Blackwell, vol. 17(2), pages 115-156, 04.
  14. Harmon, Colm & Walker, Ian, 1995. "Estimates of the Economic Return to Schooling for the United Kingdom," American Economic Review, American Economic Association, vol. 85(5), pages 1278-86, December.
  15. P. J. Sloane & H. Battu & P. T. Seaman, 1999. "Overeducation, undereducation and the British labour market," Applied Economics, Taylor & Francis Journals, vol. 31(11), pages 1437-1453.
  16. John P. Haisken-DeNew & Jan Kleibrink, 2013. "Walking Wounded – The Causal Welfare Loss of Underemployment through Overeducation," Ruhr Economic Papers 0423, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  17. Hartog, Joop, 2000. "Over-education and earnings: where are we, where should we go?," Economics of Education Review, Elsevier, vol. 19(2), pages 131-147, April.
  18. Hartog, Joop & Oosterbeek, Hessel, 1988. "Education, allocation and earnings in the Netherlands: 0verschooling?," Economics of Education Review, Elsevier, vol. 7(2), pages 185-194, April.
  19. Harmon, Colm & Walker, Ian, 2000. "The Returns to the Quantity and Quality of Education: Evidence for Men in England and Wales," Economica, London School of Economics and Political Science, vol. 67(265), pages 19-35, February.
  20. Alfonso Alba-Ramírez, 1993. "Mismatch in the Spanish Labor Market: Overeducation?," Journal of Human Resources, University of Wisconsin Press, vol. 28(2), pages 259-278.
  21. Rubb, S., 2003. "Overeducation in the labor market: a comment and re-analysis of a meta-analysis," Economics of Education Review, Elsevier, vol. 22(6), pages 621-629, December.
  22. Richard R. Verdugo & Naomi Turner Verdugo, 1989. "The Impact of Surplus Schooling on Earnings: Some Additional Findings," Journal of Human Resources, University of Wisconsin Press, vol. 24(4), pages 629-643.
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