Returns to Overeducation: A Longitudinal Analysis of the U.S. Labor Market

Posted: 7 Feb 2013 Last revised: 22 Jan 2014

See all articles by Yuping Tsai

Yuping Tsai

Government of the United States of America - Centers for Disease Control and Prevention (CDC)

Date Written: August 1, 2010

Abstract

Studies examining the wage effect of overeducation have generated very consistent results. Their findings suggest that, for workers with similar educational attainment, workers who are overeducated for the job suffer from significant wage penalties. However, most studies use cross-sectional data, implicitly assuming that workers are randomly assigned to being overeducated. Using data from the Panel Study of Income Dynamics for the period 1979-2005, this study conducts a panel analysis to account for time-constant individual characteristics. It uses a numerical approach to provide the wage effects in the presence of non-classical measurement error in the educational mismatch variables. The results provide evidence that overeducated status does not cause lower earnings. Instead, the significant wage differential found in previous studies is simply a result of ignoring the non-random assignment of workers to jobs.

Suggested Citation

Tsai, Yuping, Returns to Overeducation: A Longitudinal Analysis of the U.S. Labor Market (August 1, 2010). Economics of Education Review, Vol. 29, No. 4, 2010, Available at SSRN: https://ssrn.com/abstract=2212874

Yuping Tsai (Contact Author)

Government of the United States of America - Centers for Disease Control and Prevention (CDC) ( email )

1600 Clifton Road NE, MS A19
Atlanta, GA 30329
United States

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