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Is the Over-Education Wage Penalty Permanent?

Author

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  • Joanne Lindley

    () (Department of Economics, The University of Sheffield)

  • Steven McIntosh

    () (Department of Economics, The University of Sheffield)

Abstract

Much has been written about the impact of over-education on wages using cross-sectional data, although there have been few studies that analyse the returns to over-education in a dynamic setting. This paper adds to the existing literature by using panel data to investigate the impact and permanence of over-education wage penalties, whilst controlling for unobserved individual heterogeneity. Our fixed effects estimates suggest that the over-education wage penalty cannot solely be explained by unobserved heterogeneity. Over-education is permanent for many workers since around 50 percent of workers over-educated in 1991 are still over-educated in 2005. However, we also show that these workers are of lower quality compared to around 25 percent who find a match within five years of being over-educated. Finally, there is a significant scarring effect for workers over-educated in 1991 since they never fully reach parity compared to those who were matched in 1991, although this is not the case for graduates who manage to find a match within 5 years.

Suggested Citation

  • Joanne Lindley & Steven McIntosh, 2010. "Is the Over-Education Wage Penalty Permanent?," Working Papers 2010004, The University of Sheffield, Department of Economics, revised Jan 2010.
  • Handle: RePEc:shf:wpaper:2010004
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    References listed on IDEAS

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    Cited by:

    1. Maite Blázquez & Santiago Budría, 2012. "Overeducation dynamics and personality," Education Economics, Taylor & Francis Journals, vol. 20(3), pages 260-283, March.
    2. Marco Pecoraro, 2014. "Is There Still a Wage Penalty for Being Overeducated But Well-matched in Skills? A Panel Data Analysis of a Swiss Graduate Cohort," LABOUR, CEIS, vol. 28(3), pages 309-337, September.
    3. repec:taf:edecon:v:25:y:2017:i:5:p:462-481 is not listed on IDEAS
    4. Nelson Oviedo & Gustavo Yamada, 2017. "Educación superior y subempleo profesional, ¿Una creciente burbuja mundial?," Working Papers 1609, Departamento de Economía, Universidad del Pacífico, revised Feb 2017.
    5. Aleksander Kucel & Montserrat Vilalta-Bufi, 2012. "Why do university graduates regret their study program? A comparison between Spain and the Netherlands," Working Papers in Economics 279, Universitat de Barcelona. Espai de Recerca en Economia.
    6. Jan Baran, 2016. "A side effect of a university boom: rising incidence of overeducation among tertiary-educated workers in Poland," Working Papers 2016-22, Faculty of Economic Sciences, University of Warsaw.
    7. Ghignoni, Emanuela & Verashchagina, Alina, 2014. "Educational qualifications mismatch in Europe. Is it demand or supply driven?," Journal of Comparative Economics, Elsevier, vol. 42(3), pages 670-692.
    8. Eleni Kalfa & Matloob Piracha, 2017. "Immigrants’ educational mismatch and the penalty of over-education," Education Economics, Taylor & Francis Journals, vol. 25(5), pages 462-481, September.

    More about this item

    Keywords

    Over-education; Skills;

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • I2 - Health, Education, and Welfare - - Education

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