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Wage penalty of overeducation: New micro-evidence from China

Na Wu and Qunyong Wang

China Economic Review, 2018, vol. 50, issue C, 206-217

Abstract: This paper studies the wage penalty of overeducation using the World Bank's STEP (Skills Towards Employability and Productivity) survey in China. Based on the measurements of cognitive, technical, and non-cognitive skills, the overeducated have systematically lower abilities compared with the well-matched, just as the skill heterogeneity theory predicts. Endogenous switching model is adopted to estimate the effect of overeducation on wage. We find that the overeducated workers with tertiary education suffer from significant loss compared with the well-matched workers, while overeducation has no significant effect on workers with high school education. The causality inference using nearest neighbor matching and propensity score weighted regression methods reveals that our conclusions are robust.

Keywords: Overeducation; Wage penalty; STEP survey of the World Bank; Treatment effect (search for similar items in EconPapers)
JEL-codes: O15 O17 O18 (search for similar items in EconPapers)
Date: 2018
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China Economic Review is currently edited by B.M. Fleisher, K. X. D. Huang, M.E. Lovely, Y. Wen, X. Zhang and X. Zhu

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