Earnings Penalty of Educational Mismatch: A Comparison of Alternative Methods of Assessing Over-Education

Arbeitspapier

In this paper we systematically evaluate the impact of using the alternative methods conventionally used in the international literature on the measured incidence of educational mismatch and its earnings effects. We use a rich Australian longitudinal data set for a controlled group of full-time employed workers. Using panel data estimation, we address individual heterogeneity and measurement error, which are important in educational mismatch analysis. We show that alternative methods of measurement result in a range of estimates, with the Mode measure providing the most stable results across instrumental variables (IV) selections in panel fixed effects instrumental variables (FEIV) estimations. Based on the Mode measure, the incidence rate of over-education is 32.3%. The earnings penalty for each year of over-education is 2.5%, which is larger than 0.6% in fixed effect estimation and also larger than 1.9% in OLS estimations.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IZA Discussion Papers ; No. 15943

Classification and Topics

• Classification: Wirtschaft ; Human Capital; Skills; Occupational Choice; Labor Productivity ; Wage Level and Structure; Wage Differentials
• Subject: over-education ; education mismatch ; earnings ; measurement error ; instrumental variable

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Wen, Le ; Maani, Sholeh A.
• Event: Veröffentlichung
• (who): Institute of Labor Economics (IZA)
• (where): Bonn
• (when): 2023

Further information

• Handle: http://hdl.handle.net/10419/272570
• Last update: 10.03.2025, 11:43 AM CET