Signalling and Productivity Effects of Overeducation: Is It Really a Waste of Resources?

Overeducation raises concerns that governments may be overinvesting in education. To inform the debate, this paper studies the impact of overeducation on productivity. We advance the literature by considering that returns to overeducation may be due both to productivity and signalling effects. To disentangle both effects, we apply Wolpin’s (1977) methodology and compare the rates of return of screened (employed) and unscreened (selfemployed) workers. To overcome well-known endogeneity problems due to unobserved heterogeneity, we estimate a panel with individual and employment-status fixed effects. Our results show that signalling effects are relevant and that overeducation does not carry a productivity penalty. Keywords: Overeducation, signalling model, human capital model, unobserved heterogeneity. JEL classification: I20, J24, J31.

Informality and overeducation in the labor market of a developing country

In this paper, we explore the connection between labor market segmentation in two sectors, a modern protected formal sector and a traditional- unprotected-informal sector, and overeducation in a developing country. Informality is thought to have negative consequences, primarily through poorer working conditions, lack of social security, as well as low levels of productivity throughout the economy. This paper considers an aspect that has not been previously addressed, namely the fact that informality might also affect the way workers match their actual education with that required performing their job. We use micro-data from Colombia to test the relationship between overeducation and informality. Empirical results suggest that, once the endogeneity of employment choice has been accounted for, formal male workers are less likely to be overeducated. Interestingly, the propensity of being overeducated among women does not seem to be closely related to the employment choice.

Overeducation among European university graduates : a comparative analysis ot its incidence and the importance of higher education differentiation

The incidence of over-education is here assessed by applying some standard subjective and objective indicators and a new skill-based indicator of over-education to the national samples of eight European countries in the REFLEX survey. With the exception of Spain, the results reveal that over-education is a minor risk amongst European tertiary graduates. Yet, the contrast between the standard indicators and the skill-based indicator reveals the existence of an over-education of a moderate kind in countries with high tertiary attainment rates (Norway, Finland and Netherlands). Such a type of over-education does not come to the surface when applying the standard indicators. Our results also reveal the importance of higher education differentiation (i.e. field of study and branch of higher education) for understanding the risk of over-education. Graduates from humanistic fields, bachelor courses and vocational colleges are more exposed to over-education, though their disadvantage varies across-nationally to a significant extent.

Wage inequality and unemployment with overeducation

A skill-biased change in technology can account at once for the changes observed in a number of important variables of the US labour market between 1970 and 1990. These include the increasing inequality in wages, both between and within education groups, and the increase in unemployment at all levels of education. In contrast, in previous literature this type of technology shock cannot account for all of these changes. The paper uses a matching model with a segmented labour market, an imperfect correlation between individual ability and education, and a fixed cost of setting up a job. The endogenous increase in overeducation is key to understand the response of unemployment to the technology shock.

Non-formal education, overeducation and wages

Why do overeducated workers participate in non-formal education activities? Do not they suffer from an excess of education? Using microdata from the Spanish sample of the 2007 Adult Education Survey, we have found that overeducated workers participate more than the rest in non-formal education and that they earn higher wages than overeducated workers who did not participate. This result can be interpreted as evidence that non-formal education allows overeducated workers to acquire new abilities that improve their competence at the job they perform. From this point of view, our results support the European Commission"s view on the need to reinforce lifelong learning among adult population.

Regional economic growth and human capital: the role of overeducation

This article analyses the link between human capital and regional economic growth in the European Union. Using various indicators of human capital calculated from census microdata, we conclude that the recent economic performance of European regions is associated with an increase in overeducation. In fact, measures of educational mismatch seem to be more strongly connected to regional economic performance than do other traditional measures of human capital stock.

Overeducation, skills and wage penalty: Evidence for Spain using PIAAC data

The literature on educational mismatches finds that overeducated workers suffer a wage penalty compared with properly educated workers with the same level of education. Recent literature also suggests that individuals’ skill heterogeneity could explain wage differences between overeducated and properly matched workers. The hypothesis is that overeducated workers earn less due to their lower competences and skills in relative terms. However, that hypothesis has been rarely tested due to data limitations on individuals’ skills. The aim of this paper is to test the individuals’ skill heterogeneity theory in Spain using microdata from PIAAC, because it is one of the developed countries supporting the highest overeducation rates and where its adult population holds the lowest level of skills among a set of developed countries. Our hypothesis is that the wage penalty of overeducation in Spain is explained by the lower skill level of overeducated workers. The obtained evidence confirms this hypothesis but only to a certain extent as skills only explain partially the wage penalty of overeducation.

Regional economic growth and human capital: the role of overeducation

The paper analyses the link between human capital and regional economic growth in the European Union. Using different indicators of human capital calculated from census microdata, we conclude that the recent economic performance of European regions is associated to an increase in overeducation. In fact, measures of educational mismatch seem to have a stronger connection to regional economic performance than other traditional measures of human capital stocks.

Sobreeducación y Sobrecualificación en los Universitarios Catalanes. Una perspectiva de género

Partiendo de una muestra compuesta por más de 19.000 titulados universitarios encuestados en 2008 y 2011, 3 años y medio después de haber finalizado sus estudios, obtenemos que la incidencia de la sobreeducación femenina está por debajo de la masculina. Con la sobrecualificación los resultados son similares. Las estimaciones de las ecuaciones salariales indican que el desajuste educativo y competencial generan una importante reducción de los ingresos para ambos sexos. La penalización a la sobreeducación es mayor para las tituladas. En cambio, se observa que la pérdida de ingresos causada por la sobrecualificación en las competencias de gestión es mayor para los hombres. El efecto de la sobrecualificación en sus niveles más elevados llega a equilibrar el impacto más favorable de la sobreeducación masculina. Los resultados obtenidos no se pueden explicar a través de la segmentación del mercado laboral de los graduados, ni tampoco a partir de la preferencia femenina por condiciones laborales a las cuales otorgan atributos positivos. En cambio, no es posible rechazar la existencia de discriminación hacia las egresadas. Tampoco es posible descartar que las asimetrías en el impacto de los desajustes estén causadas por una concepción distinta del fenómeno de la sobreeducación por parte de hombres y mujeres.

Job Satisfaction of Spanish University Graduates

This paper investigates the determinants of job satisfaction of university graduates in Spain. We base our analysis on Locke"s discrepancy theory [Locke (1969)] and decompose subjective evaluation of job characteristics into surplus and deficit levels. We also study the importance of overeducation and over-skilling on job satisfaction. We use REFLEX data, a survey of university graduates. We conclude that job satisfaction is mostly determined by the subjective evaluation of intrinsic job characteristics, with an asymmetric impact of surpluses and deficits. Over-skilling is much more important than over-education in explaining the job satisfaction of university graduates, although the latter is also significant.