The Impact of Educational Mismatches on Wages: The Influence of Measurement Error and Unobserved Heterogeneity

Sellami Sana (), Dieter Verhaest, Nonneman Walter () and Walter Van Trier ()
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Sellami Sana: Faculty of Applied Economics, Department of Economics, Antwerp University, 2000Antwerpen, Belgium
Nonneman Walter: Faculty of Applied Economics, Department of Economics, Antwerp University, 2000Antwerpen, Belgium
Walter Van Trier: SHERPPA, Ghent University, 9000Gent, Belgium

The B.E. Journal of Economic Analysis & Policy, 2017, vol. 17, issue 1, 20

Abstract: We investigate the differential impact of alternative combinations of horizontal and vertical educational mismatches on wages. By using panel data for Belgian graduates, we consider the role of unobserved worker heterogeneity. Random measurement error in both types of mismatches is accounted for by adopting instrumental variable techniques. We consistently find that overeducated individuals without field of study mismatch earn less than adequately educated workers with a similar educational background. However, for individuals who are working outside their field of study, such a wage penalty is not always observed once accounting for unobserved heterogeneity and random measurement error. In some cases, field of study mismatch even seems to be financially beneficial to the worker. These findings contribute to our understanding regarding the extent to which educational mismatches are truly problematic. The results call for policies that focus primarily on combatting vertical mismatches.

Keywords: returns to education; field of study mismatch; overeducation; underemployment; earnings inequality; ability bias (search for similar items in EconPapers)
JEL-codes: I24 J24 J31 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (7)

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Working Paper: The impact of educational mismatches on wages: The influence of measurement error and unobserved heterogeneity (2015)
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DOI: 10.1515/bejeap-2016-0055

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