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A Mismatch Made in Heaven: A Hedonic Analysis of Overeducation and Undereducation

Author

Listed:
  • Daniel P. McMillen

    (University of Illinois at Chicago)

  • Paul T. Seaman

    (Department of Economic Studies University of Dundee)

  • Larry D. Singell

    (University of Oregon Economics Department)

Abstract
Prior work suggests coordination failure between labour and education markets leads some workers to have educational qualifications in excess of those specified for the job (overeducation) and others to have less (undereducation). This paper empirically models and tests the hypothesis that overeducation and undereducation arise out of a hedonic matching process that maximises net benefits to workers and firms over the life of the match. Specifically, the overeducated begin in low-paying, entry-level jobs early in their careers that prepare them for higher-paying future positions that require their educational background, whereas the undereducated start in lower-paying, exactly-educated jobs that can signal skills necessary for promotion. The empirical model shows that, because all workers are exactly-educated during at least a portion of their career, the type of educational match cannot be directly identified using a cross-section, but may be imputed from the differences between predicted and observed qualifications of the worker and predicted and observed requirements of the firm. The empirical analysis uses a rich cross-section of British working-age males to identify match types. Using contemporaneous, forward- and backward-looking data, we confirm that over and undereducated matches differ in their on-the-job training and promotion opportunities, which yield a trade-off in the pre- versus post-match return to human capital.

Suggested Citation

  • Daniel P. McMillen & Paul T. Seaman & Larry D. Singell, 2003. "A Mismatch Made in Heaven: A Hedonic Analysis of Overeducation and Undereducation," University of Oregon Economics Department Working Papers 2004-1, University of Oregon Economics Department, revised 01 Dec 2003.
    • Handle: RePEc:ore:uoecwp:2004-1
    as

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    File URL: http://economics.uoregon.edu/papers/UO-2004-1_McMillen_Mismatch.pdf
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    References listed on IDEAS

    as
    1. Duncan, Greg J. & Hoffman, Saul D., 1981. "The incidence and wage effects of overeducation," Economics of Education Review, Elsevier, vol. 1(1), pages 75-86, February.
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    Cited by:

    1. Didier, Nicolas, 2024. "Educational mismatch, labor market completeness, and gender: Evidence from Chile," International Journal of Educational Development, Elsevier, vol. 105(C).

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    More about this item

    Keywords

    Overeducation; Undereducation;

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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