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Overeducation, Wages and Promotions within the Firm

  • Groeneveld, Sandra


    (Erasmus University Rotterdam)

  • Hartog, Joop


    (University of Amsterdam)

We analyse data from personnel records of a large firm producing energy and telecommunication and test for the effect of deviations between required and attained education of workers. Required education is measured as hiring standards set by the firm. We find the usual effects of over- and undereducation in a wage regression, thus rejecting the argument that such effects are exclusively due to firm fixed effects. Distinguishing, within the firm, between a sheltered internal labour market and an exposed external labour market, we find that at the internal labour market over- and undereducation significantly affect career development, in particular at younger ages, but that such effects are mostly absent at the firm’s external labour market.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 883.

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Length: 23 pages
Date of creation: Oct 2003
Date of revision:
Publication status: published in: Labour Economics, 2004, 11 (6), 701-714
Handle: RePEc:iza:izadps:dp883
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  1. Berg, Gerard J. van den & Gautier, Pieter A. & Ours, Jan C., 1998. "Worker turnover at the firm level and crowding out of lower educated workers," Serie Research Memoranda 0049, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
  2. Daly, Mary C. & Buchel, Felix & Duncan, Greg J., 2000. "Premiums and penalties for surplus and deficit education: Evidence from the United States and Germany," Economics of Education Review, Elsevier, vol. 19(2), pages 169-178, April.
  3. L. Wade, 1988. "Review," Public Choice, Springer, vol. 58(1), pages 99-100, July.
  4. Gibbons, Robert & Waldman, Michael, 1999. "Careers in organizations: Theory and evidence," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 36, pages 2373-2437 Elsevier.
  5. Hartog, Joop, 1988. "An Ordered Response Model for Allocation and Earnings," Kyklos, Wiley Blackwell, vol. 41(1), pages 113-41.
  6. 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.
  7. Büchel, Felix & Mertens, Antje, 2000. "Overeducation, Undereducation, and the Theory of Career Mobility," IZA Discussion Papers 195, Institute for the Study of Labor (IZA).
  8. 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.
  9. Groot, Wim & Maassen van den Brink, Henriette, 2000. "Overeducation in the labor market: a meta-analysis," Economics of Education Review, Elsevier, vol. 19(2), pages 149-158, April.
  10. Dolton, Peter & Vignoles, Anna, 2000. "The incidence and effects of overeducation in the U.K. graduate labour market," Economics of Education Review, Elsevier, vol. 19(2), pages 179-198, April.
  11. John Robst, 1995. "Career Mobility, Job Match, and Overeducation," Eastern Economic Journal, Eastern Economic Association, vol. 21(4), pages 539-550, Fall.
  12. Sicherman, Nachum, 1991. ""Overeducation" in the Labor Market," Journal of Labor Economics, University of Chicago Press, vol. 9(2), pages 101-22, April.
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