The impact of overeducation on wages of recent economic sciences graduates

DE SANTIS, MARIANA; GÁNAME, MARÍA CECILIA; MONCARZ, PEDRO ESTEBAN

Social Indicators Research

Springer

Año: 2022 vol. 163 p. 409 - 445

0303-8300

According to human capital theory, wages aredetermined by workers´ productivity which, in its crudest form, implies thatreturn to education does not depend on how workers´ skills are used. However,after controlling for other differences, the empirical evidence shows thatworkers with identical education are paid differently. The literature evidencesthat young people are more likely to experience a mismatch between their formaleducation and the one required for their jobs. While there is no consensus onthe reasons for the mismatch phenomenon, one consequence is clear, in terms ofwages overeducation means a penalty. Our evidence shows that overeducatedgraduates of the Facultad de Ciencias Económicas of the UniversidadNacional de Córdoba suffer a wage penalty compared to those working in ajob that requires a university degree. The results are robust to differentspecifications and the use of alternative estimators. Even though is notstatistically significant, the penalty of a severe level of overeducation ishigher than one for a mild level of overeducation; having had work experiencewhile studying at university helps to reduce the cost of overeducation; womenexhibit a similar penalty to men. While on average overeducation means a wagepenalty, there is great heterogeneity among overeducated graduates, with thoseat the top end of the wage distribution experiencing a much lower penalty, oreven a premium in some cases. Finally, while in the case of overeducation wefind statistically significant effects, the same is not true of the horizontalmismatch in terms of knowledge.