Overeducated Workers as an Insurance Device

Guido Bulmahn and Matthias Kräkel ()

LABOUR, 2002, vol. 16, issue 2, pages 383-402

Abstract: Empirical findings show that firms frequently employ overeducated workers. Since overeducated workers earn more than adequately educated ones working in similar jobs these findings seem to be puzzling. In this paper, we introduce an insurance approach to explain the employment of overeducated workers. Referring to this approach, overeducated workers are employed by a firm to avoid high losses in the case of a crisis (e.g. when the production process breaks down). Contrary to adequately educated workers, overeducated ones may be helpful in this situation by quickly offering improvisatorial solutions. First, we use a simple model to demonstrate the insurance argument. Second, we test the major implication of the model empirically by using industry panel data: if and only if high‐skilled workers are employed for insurance purposes, the average wage of high‐skilled workers in firms that need insurance will be lower compared with firms that do not need insurance. The data confirm this theoretical result. Copyright Fondazione Giacomo Brodolini and Blackwell Publishers Ltd 2002.

Date: 2002
References: Add references at CitEc
Citations Track citations by RSS feed

Downloads: (external link)
http://www.blackwell-synergy.com/servlet/useragent ... &year=2002&part=null link to full text (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:bla:labour:v:16:y:2002:i:2:p:383-402

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=1121-7081

Access Statistics for this article

LABOUR is edited by Franco Peracchi

More articles in LABOUR from CEIS
Contact information at EDIRC.
Series data maintained by Wiley-Blackwell Digital Licensing ().