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Over‐, Required, and Undereducation: Consequences on the Bottom Lines of Firms

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  • Stephan Kampelmann
  • Benoît Mahy
  • François Rycx
  • Guillaume Vermeylen

Abstract

We provide first evidence regarding the direct effect of over‐, required, and undereducation on the bottom lines of firms across work environments. We use detailed Belgian linked employer–employee panel data, rely on the methodological approach pioneered by Hellerstein et al. (1999), and estimate dynamic panel data models at the firm level. Our findings show an ‘inverted L’ profitability profile: undereducation is associated with lower profits, whereas higher levels of required and overeducation are correlated with positive economic rents of roughly the same magnitude. The size of these effects is amplified in firms experiencing economic uncertainty or operating in high‐tech/knowledge sectors.

Suggested Citation

  • Stephan Kampelmann & Benoît Mahy & François Rycx & Guillaume Vermeylen, 2020. "Over‐, Required, and Undereducation: Consequences on the Bottom Lines of Firms," LABOUR, CEIS, vol. 34(1), pages 80-112, March.
    • Handle: RePEc:bla:labour:v:34:y:2020:i:1:p:80-112
    DOI: 10.1111/labr.12152
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    Cited by:

    1. Araújo, Isabel & Carneiro, Anabela, 2020. "Educational Mismatches of Newly Hired Workers: Short and Medium-run Effects on Wages," GLO Discussion Paper Series 668, Global Labor Organization (GLO).
    2. Rycx, François & Santosuosso, Giulia & Vermeylen, Guillaume, 2022. "The Over-Education Wage Penalty among PhD Holders: A European Perspective," IZA Discussion Papers 15417, Institute of Labor Economics (IZA).
    3. V. Jacobs & F. Rycx & M. Volral, 2022. "Wage Effects of Educational Mismatch According to Workers’ Origin: The Role of Demographics and Firm Characteristics," De Economist, Springer, vol. 170(4), pages 459-501, November.
    4. Valentine Jacobs & Kevin Pineda-Hernández & François Rycx & Mélanie Volral, 2023. "Does over-education raise productivity and wages equally? The moderating role of workers’ origin and immigrants’ background," Education Economics, Taylor & Francis Journals, vol. 31(6), pages 698-724, November.
    5. Valentine Jacobs, 2021. "Wage Effects of Educational Mismatch According to Workers’ Origin: The Role of Demographics and Firm Characteristics," DULBEA Working Papers 23562, ULB -- Universite Libre de Bruxelles.

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