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The Impact of Educational Mismatches on Wages: The Influence of Measurement Error and Unobserved Heterogeneity

Author

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  • Sellami Sana

    (Faculty of Applied Economics, Department of Economics, Antwerp University, 2000Antwerpen, Belgium)

  • Verhaest Dieter

    (Faculty of Economics and Business, ECON research group and Leuven Economics of Education Research (LEER), KU Leuven, campus Brussels, Brussels, Belgium)

  • Nonneman Walter

    (Faculty of Applied Economics, Department of Economics, Antwerp University, 2000Antwerpen, Belgium)

  • Van Trier Walter

    (SHERPPA, Ghent University, 9000Gent, Belgium)

Abstract

We investigate the differential impact of alternative combinations of horizontal and vertical educational mismatches on wages. By using panel data for Belgian graduates, we consider the role of unobserved worker heterogeneity. Random measurement error in both types of mismatches is accounted for by adopting instrumental variable techniques. We consistently find that overeducated individuals without field of study mismatch earn less than adequately educated workers with a similar educational background. However, for individuals who are working outside their field of study, such a wage penalty is not always observed once accounting for unobserved heterogeneity and random measurement error. In some cases, field of study mismatch even seems to be financially beneficial to the worker. These findings contribute to our understanding regarding the extent to which educational mismatches are truly problematic. The results call for policies that focus primarily on combatting vertical mismatches.

Suggested Citation

  • Sellami Sana & Verhaest Dieter & Nonneman Walter & Van Trier Walter, 2017. "The Impact of Educational Mismatches on Wages: The Influence of Measurement Error and Unobserved Heterogeneity," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 17(1), pages 1-20, February.
    • Handle: RePEc:bpj:bejeap:v:17:y:2017:i:1:p:20:n:4
    DOI: 10.1515/bejeap-2016-0055
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    Cited by:

    1. Dieter Verhaest & Stijn Baert, 2018. "The effects of workplace learning in higher education on employment and match quality: is there an early-career trade-off?," Empirical Economics, Springer, vol. 55(3), pages 1229-1270, November.
    2. David Boto-García & Marta Escalonilla, 2022. "University education, mismatched jobs: are there gender differences in the drivers of overeducation?," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 39(3), pages 861-902, October.
    3. Mariana Olga De Santis & María Cecilia Gáname & Pedro Esteban Moncarz, 2022. "The Impact of Overeducation on Wages of Recent Economic Sciences Graduates," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 163(1), pages 409-445, August.
    4. Wen, Le & Maani, Sholeh A., 2023. "Earnings Penalty of Educational Mismatch: A Comparison of Alternative Methods of Assessing Over-Education," IZA Discussion Papers 15943, Institute of Labor Economics (IZA).
    5. Yuki Onozuka, 2022. "Basic Skills or Major-Specific Knowledge? Sources of Wage Penalties for Working Outside the Major Field of Study," Journal of Labor Research, Springer, vol. 43(1), pages 24-64, March.
    6. Balzhan Serikbayeva & Kanat Abdulla, 2022. "Education-Job Mismatch: Implications for Individual Earnings and Aggregate Output," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 163(2), pages 723-752, September.
    7. Haizheng Li, 2023. "Comment on “What Can Students Gain from China's Higher Education?”," Asian Economic Policy Review, Japan Center for Economic Research, vol. 18(2), pages 307-308, July.

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    More about this item

    Keywords

    returns to education; field of study mismatch; overeducation; underemployment; earnings inequality; ability bias;
    All these keywords.

    JEL classification:

    • I24 - Health, Education, and Welfare - - Education - - - Education and Inequality
    • 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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