Overeducation: A Disease of the School-to-Work Transition System

Floro Caroleo () and Francesco Pastore

No 9049, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper aims to survey the theoretical and empirical literature on cross-country differences in overeducation. While technological change and globalization have entailed a skill-bias in the evolution of labour demand in the Anglo-Saxon countries, instead, in other advanced economies in Western Europe the increased educational level has not been associated with a parallel raise in the share of skilled occupations, therefore generating skills mismatch. This suggests that a demand-side explanation of overeducation is justified in Western Europe, which would be also confirmed by circumstantial evidence coming from the recent literature. Nonetheless, overeducation may also turn to be positive in the long run if the expansion of the supply of skills generates a technological upgrading of the production system. Moreover, from a micro-economic point of view, recent theoretical and empirical studies tend to justify a human capital theory based interpretation of the phenomenon, whereas the disorganization of the educational system, its degree of integration with the labour market may play an important role in helping young graduates develop the work experience and the competences they need to prevent them from experiencing overeducation. Overeducation causes a penalty to individuals in terms of earnings and employment opportunities and a waste of resources to the society at large in terms of state investment into education that do not bear its yields. Both penalties are higher not only where the demand for skill is lower, but also where school-to-work transition systems fail to effectively address the aim of generating competences rather than only education for their graduates.

Keywords: school-to-work transition; university graduates; AlmaLaurea; overeducation; overskilling; earnings; (ordered) probit; sample selection bias; Heckit; Italy (search for similar items in EconPapers)
JEL-codes: C25 C26 C33 I2 J13 J24 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2015-05
New Economics Papers: this item is included in nep-edu and nep-eur
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Published - published in: G. Coppola and N. O'Higgins (eds): Youth and the Crisis: Unemployment, Education and Health in Europe, Routledge, 2016, 36-56

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