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Delayed Graduation and Overeducation: A Test of the Human Capital Model versus the Screening Hypothesis

Carmen Aina () and Francesco Pastore ()

No 6413, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: The academic circles are devoting a growing interest to delayed graduation and overeducation, but none has analyzed the joint consequences of these two phenomena. Thus, this paper studies the link between graduation not within the minimum period and overeducation, and the effects of these variables on wages, using the ISFOL-Plus data. According to the human capital model, delayed graduation increases a student' human capital and should, therefore, reduce her probability of being overeducated, while increasing her wage. According to the screening hypothesis, instead, delayed graduation signals low skills and therefore increases the chances of being overeducated, while bearing a wage penalty. The evidence lines towards predictions based on the screening hypothesis. First, delayed graduation increases the chances of overeducation. In addition, the direct wage penalty associated to delayed graduation equals 7% of the median wage. However, being a determinant of overeducation, it also indirectly contributes to the penalty of 19.8% of the median wage associated to overeducation. These effects are sizeable, considering the very low returns to higher education in Italy reported in previous studies.

Keywords: university-to-work transition; delayed graduation; overeducation; human capital theory; screening hypothesis; earnings equations; Italy (search for similar items in EconPapers)
JEL-codes: C25 C26 C33 I2 J13 J24 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2012-03
New Economics Papers: this item is included in nep-hrm and nep-lab
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Citations: View citations in EconPapers (17) Track citations by RSS feed

Forthcoming in: Social Indicators Research, 2020

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