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Is the Over-Education Wage Penalty Permanent?

Joanne Lindley () and Steven McIntosh ()

No 2010004, Working Papers from The University of Sheffield, Department of Economics

Abstract: Much has been written about the impact of over-education on wages using cross-sectional data, although there have been few studies that analyse the returns to over-education in a dynamic setting. This paper adds to the existing literature by using panel data to investigate the impact and permanence of over-education wage penalties, whilst controlling for unobserved individual heterogeneity. Our fixed effects estimates suggest that the over-education wage penalty cannot solely be explained by unobserved heterogeneity. Over-education is permanent for many workers since around 50 percent of workers over-educated in 1991 are still over-educated in 2005. However, we also show that these workers are of lower quality compared to around 25 percent who find a match within five years of being over-educated. Finally, there is a significant scarring effect for workers over-educated in 1991 since they never fully reach parity compared to those who were matched in 1991, although this is not the case for graduates who manage to find a match within 5 years.

Keywords: Over-education; Skills (search for similar items in EconPapers)
JEL-codes: J24 J31 I2 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-edu and nep-lab
Date: 2010-01, Revised 2010-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4) Track citations by RSS feed

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http://www.shef.ac.uk/economics/research/serps/articles/2010_004.html First version, 2010 (application/pdf)

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