The effect of overeducation on unemployment in OECD countries

Connor McGrath
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Connor McGrath: Monash University

Warwick-Monash Economics Student Papers from Warwick Monash Economics Student Papers

Abstract: The optimal allocation of human resources into different areas of the economy is vital for the growth and productivity of countries, particularly in a rapidly changing workforce environment. Previous literature and statistics indicate that overeducation (when an individual is overqualified for their career) lengthens unemployment at the individual level after graduation, among other negative outcomes. This study aimed to assess whether increasing the proportion of higher degree graduates affected the unemployment rate of countries in the subsequent year, using a differences in differences model. The study used graduation data from 2013-2018 in 23 countries. The results suggest that having more bachelor’s and master’s degree graduates increases the next year’s unemployment rate in countries with higher relative levels of overeducation, while increasing graduates from other degree types did not have this effect. This study was severely limited by a small sample size, but the results suggest further research on this issue is warranted.

Keywords: Educational Attainment; Returns to Education; Unemployment JEL classifications: I21; I26; J6 (search for similar items in EconPapers)
Date: 2023
New Economics Papers: this item is included in nep-des and nep-lab
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