Nash Bargaining and the Wage Consequences of Educational Mismatches

Joop Hartog and Michael Sattinger
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Joop Hartog: University of Amsterdam

No 12-129/V, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: This paper has resulted in a publication in Labour Economics (2013), 23, 50-56.

The paper provides a theoretical foundation for the empirical regularities observed in estimations of wage consequences of overeducation and undereducation. Workers with more education than required for their jobs are observed to suffer wage penalties relative to workers with the same education in jobs that only require their educational level. Similarly, workers with less education than required for their jobs earn wage rewards. These departures from the Mincer human capital earnings function can be explained by Nash bargaining between workers and employers. Under fairly mild assumptions, Nash bargaining predicts a wage penalty for overeducation and a wage reward for undereducation, and further predicts that the wage penalty will exceed the wage reward. This paper reviews the established empirical regularities and then provides Nash bargaining results that explain these regularities.

Keywords: Overeducation; Undereducation; Nash bargaining; Qualitative mismatches; Mincer earnings function; Wages (search for similar items in EconPapers)
JEL-codes: C51 C78 J24 J31 (search for similar items in EconPapers)
Date: 2012-11-27
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https://papers.tinbergen.nl/12129.pdf (application/pdf)

Related works:
Journal Article: Nash bargaining and the wage consequences of educational mismatches (2013)
Working Paper: Nash Bargaining and the Wage Consequences of Educational Mismatches (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:20120129

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