The Productivity Benefits of Overeducation

Miana Plesca and Fraser Summerfield

Journal of Human Capital, 2023, vol. 17, issue 4, 463 - 502

Abstract: Overeducation is an issue of concern in the public discourse that has implications for aggregate labor productivity. Extending a literature focused on individual outcomes, we find productivity-enhancing effects in Canadian data by province and industry spanning 1997–2015. Dynamic panel models with external instruments show that productivity increases by about 3% for each 1% increase in the overeducation shares. Effects are largest among industries with more intangible capital investment or with more jobs that require university education and among small-firm employees that are not unionized. Our results provide yet another argument for the benefits of postsecondary education.

Date: 2023
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