Nash Bargaining and the Wage Consequences of Educational Mismatches

Joop Hartog and Michael Sattinger

No 7025, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: The paper provides a theoretical foundation for the empirical regularities observed in estimations of wage consequences of overeducation and undereducation. Workers with more education than required for their jobs are observed to suffer wage penalties relative to workers with the same education in jobs that only require their educational level. Similarly, workers with less education than required for their jobs earn wage rewards. These departures from the Mincer human capital earnings function can be explained by Nash bargaining between workers and employers. Under fairly mild assumptions, Nash bargaining predicts a wage penalty for overeducation and a wage reward for undereducation, and further predicts that the wage penalty will exceed the wage reward. This paper reviews the established empirical regularities and then provides Nash bargaining results that explain these regularities.

Keywords: qualitative mismatches; Nash bargaining; undereducation; overeducation; Mincer earnings function; wages (search for similar items in EconPapers)
JEL-codes: C51 C78 J24 J31 (search for similar items in EconPapers)
Pages: 12 pages
Date: 2012-11
New Economics Papers: this item is included in nep-hrm, nep-lab and nep-lma
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Published - published in: Labour Economics, 2013, 23, 50-56

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Related works:
Journal Article: Nash bargaining and the wage consequences of educational mismatches (2013)
Working Paper: Nash Bargaining and the Wage Consequences of Educational Mismatches (2012)
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