IDEAS home Printed from https://ideas.repec.org/a/eee/chieco/v59y2020ics1043951x19301452.html
   My bibliography  Save this article

Overeducation, market recognition, and effective labour supply

Author

Listed:
  • He, Yu
  • Peng, Xiujian
  • Xu, Hangtian

Abstract

Supply of skilled workers in an economy is usually measured based on the number of highly educated people. This may, however, lead to an overestimation of effective labour supply when considerable people are overeducated. By incorporating a concept of “market recognition,” which proxies the gap between the capabilities reflected through the education level and the capabilities required by employers, we establish a general equilibrium model to quantify this gap in China during 1999–2011. Our calibration results show that overeducation had deteriorated as market recognition continued to decline. We give an interpretation from the perspective of effective labour supply.

Suggested Citation

  • He, Yu & Peng, Xiujian & Xu, Hangtian, 2020. "Overeducation, market recognition, and effective labour supply," China Economic Review, Elsevier, vol. 59(C).
    • Handle: RePEc:eee:chieco:v:59:y:2020:i:c:s1043951x19301452
    DOI: 10.1016/j.chieco.2019.101384
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1043951X19301452
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.chieco.2019.101384?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Arnaud Chevalier & Joanne Lindley, 2009. "Overeducation and the skills of UK graduates," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 172(2), pages 307-337, April.
    2. N. Gregory Mankiw & Ricardo Reis, 2002. "Sticky Information versus Sticky Prices: A Proposal to Replace the New Keynesian Phillips Curve," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(4), pages 1295-1328.
    3. Séamus McGuinness, 2006. "Overeducation in the Labour Market," Journal of Economic Surveys, Wiley Blackwell, vol. 20(3), pages 387-418, July.
    4. Knight, John & Deng, Quheng & Li, Shi, 2011. "The puzzle of migrant labour shortage and rural labour surplus in China," China Economic Review, Elsevier, vol. 22(4), pages 585-600.
    5. Philippe Aghion & Peter Howitt, 1994. "Growth and Unemployment," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 61(3), pages 477-494.
    6. McGuinness, Seamus & Sloane, Peter J., 2011. "Labour market mismatch among UK graduates: An analysis using REFLEX data," Economics of Education Review, Elsevier, vol. 30(1), pages 130-145, February.
    7. Li, Shi & Whalley, John & Xing, Chunbing, 2014. "China's higher education expansion and unemployment of college graduates," China Economic Review, Elsevier, vol. 30(C), pages 567-582.
    8. Nickell, Stephen & Layard, Richard, 1999. "Labor market institutions and economic performance," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 46, pages 3029-3084, Elsevier.
    9. Lilien, David M, 1982. "Sectoral Shifts and Cyclical Unemployment," Journal of Political Economy, University of Chicago Press, vol. 90(4), pages 777-793, August.
    10. Gary S. Becker, 1964. "Human Capital: A Theoretical and Empirical Analysis with Special Reference to Education, First Edition," NBER Books, National Bureau of Economic Research, Inc, number beck-5, June.
    11. Cohn, Elchanan & Khan, Shahina P., 1995. "The wage effects of overschooling revisited," Labour Economics, Elsevier, vol. 2(1), pages 67-76, March.
    12. Alberto Behar, 2004. "Estimates of labour demand elasticities and elasticities of substitution using firm-level manufacturing data," SALDRU/CSSR Working Papers 098, Southern Africa Labour and Development Research Unit, University of Cape Town.
    13. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-444, June.
    14. Mortensen, Dale & Pissarides, Christopher, 2011. "Job Creation and Job Destruction in the Theory of Unemployment," Ekonomicheskaya Politika / Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 1, pages 1-19.
    15. Richard B. Freeman, 1975. "Overinvestment in College Training?," Journal of Human Resources, University of Wisconsin Press, vol. 10(3), pages 287-311.
    16. Li, Hongbin & Ma, Yueyuan & Meng, Lingsheng & Qiao, Xue & Shi, Xinzheng, 2017. "Skill complementarities and returns to higher education: Evidence from college enrollment expansion in China," China Economic Review, Elsevier, vol. 46(C), pages 10-26.
    17. Peter B. Dixon & Martin Johnson & Maureen T. Rimmer, 2011. "Economy‐Wide Effects Of Reducing Illegal Immigrants In U.S. Employment," Contemporary Economic Policy, Western Economic Association International, vol. 29(1), pages 14-30, January.
    18. World Bank, 2017. "World Development Indicators 2017," World Bank Publications - Books, The World Bank Group, number 26447.
    19. repec:eee:labchp:v:3:y:1999:i:pc:p:3029-3084 is not listed on IDEAS
    20. Jan Oosterhaven & Hendrik Folmer, 1985. "An Interregional Labour Market Model Incorporating Vacancy Chains And Social Security," Papers in Regional Science, Wiley Blackwell, vol. 58(1), pages 141-155, January.
    21. repec:bla:scandj:v:94:y:1992:i:0:p:s51-70 is not listed on IDEAS
    22. Groot, Wim & Maassen van den Brink, Henriette, 2000. "Overeducation in the labor market: a meta-analysis," Economics of Education Review, Elsevier, vol. 19(2), pages 149-158, April.
    23. Meroni, Elena Claudia & Vera-Toscano, Esperanza, 2017. "The persistence of overeducation among recent graduates," Labour Economics, Elsevier, vol. 48(C), pages 120-143.
    24. Daly, Mary C. & Buchel, Felix & Duncan, Greg J., 2000. "Premiums and penalties for surplus and deficit education: Evidence from the United States and Germany," Economics of Education Review, Elsevier, vol. 19(2), pages 169-178, April.
    25. Michael Spence, 1973. "Job Market Signaling," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 87(3), pages 355-374.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Dai Binh Tran & Sasiwimon Warunsiri Paweenawat, 2023. "The returns to education and wage penalty from overeducation: New evidence from Vietnam," Bulletin of Economic Research, Wiley Blackwell, vol. 75(4), pages 1267-1290, October.
    2. Hao, Zedong & Wang, Yun, 2022. "Education signaling, effort investments, and the market's expectations: Theory and experiment on China's higher education expansion," China Economic Review, Elsevier, vol. 75(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hanan Morsy & Adamon N. Mukasa, 2019. "Working Paper 326 - Youth Jobs, Skill and Educational Mismatches in Africa," Working Paper Series 2452, African Development Bank.
    2. Morsy, Hanan & Mukasa, Adamon, 2019. "Youth Jobs, Skill and Educational Mismatches in Africa," MPRA Paper 100394, University Library of Munich, Germany.
    3. Marta Palczyńska, 2021. "Overeducation and wages: the role of cognitive skills and personality traits," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, vol. 21(1), pages 85-111.
    4. Léné, Alexandre, 2011. "Occupational downgrading and bumping down: The combined effects of education and experience," Labour Economics, Elsevier, vol. 18(2), pages 257-269, April.
    5. L. Cattani & G. Guidetti & G. Pedrini, 2014. "Assessing the incidence and wage effects of overeducation among Italian graduates using a new measure for educational requirements," Working Papers wp939, Dipartimento Scienze Economiche, Universita' di Bologna.
    6. Séamus McGuinness, 2006. "Overeducation in the Labour Market," Journal of Economic Surveys, Wiley Blackwell, vol. 20(3), pages 387-418, July.
    7. Paulina Broniatowska, 2021. "Wage Effects of Overeducation: Evidence from Poland," Central European Journal of Economic Modelling and Econometrics, Central European Journal of Economic Modelling and Econometrics, vol. 13(1), pages 25-53, March.
    8. Baktash, Mehrzad B., 2023. "Overeducation, Performance Pay and Wages: Evidence from Germany," GLO Discussion Paper Series 1327, Global Labor Organization (GLO).
    9. Rogerson, Richard & Shimer, Robert, 2011. "Search in Macroeconomic Models of the Labor Market," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 4, chapter 7, pages Pages: 61, Elsevier.
    10. Eleni Kalfa & Matloob Piracha, 2017. "Immigrants’ educational mismatch and the penalty of over-education," Education Economics, Taylor & Francis Journals, vol. 25(5), pages 462-481, September.
    11. Kampelmann, Stephan & Rycx, François, 2012. "The impact of educational mismatch on firm productivity: Evidence from linked panel data," Economics of Education Review, Elsevier, vol. 31(6), pages 918-931.
    12. Alain Alcouffe & Jean-Michel Plassard, 2013. "Abondance d'éducation peut -elle nuire ? Une histoire des théories de économiques de la sur-éducation," Working Papers halshs-00827251, HAL.
    13. Matloob Piracha & Massimiliano Tani & Florin Vadean, 2012. "Immigrant over- and under-education: the role of home country labour market experience," IZA Journal of Migration and Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 1(1), pages 1-21, December.
    14. Marelli, Enrico, 1999. "Convergence and asymmetries in the employment dynamics of the European regions," ERSA conference papers ersa99pa120, European Regional Science Association.
    15. Muñoz de Bustillo, Rafael & Sarkar, Sudipa & Sebastián, Raquel & Antón, José-Ignacio, 2018. "Education mismatch in Europe at the turn of the century: Measurement, intensity and evolution," MPRA Paper 85779, University Library of Munich, Germany.
    16. Fraser Summerfield & Ioannis Theodossiou, 2017. "The Effects Of Macroeconomic Conditions At Graduation On Overeducation," Economic Inquiry, Western Economic Association International, vol. 55(3), pages 1370-1387, July.
    17. Gabriela Morejón Cabrera & Petr Mariel, 2024. "Master’s degree studies and its impact on vertical and horizontal mismatch in Spain," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 41(3), pages 687-716, October.
    18. Juan Acosta-Ballesteros & María del Pilar Osorno-del Rosal & Olga María Rodríguez-Rodríguez, 2018. "Overeducation of Young Workers in Spain: How Much Does the First Job Matter? Social Indicators Research," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 138(1), pages 109-139, July.
    19. Ferreira Sequeda, Maria & Künn, Annemarie & de Grip, Andries, 2016. "Work-related learning and skill development in Europe: Does initial skill mismatch matter?," Research Memorandum 027, Maastricht University, Graduate School of Business and Economics (GSBE).
    20. François Rycx & Stephan Kampelmann & Benoit Mahy & Guillaume Vermeylen, 2016. "Who is your perfect match? Educational norms, educational mismatch and firm profitability," ULB Institutional Repository 2013/245817, ULB -- Universite Libre de Bruxelles.

    More about this item

    Keywords

    Overeducation; Market recognition; Human capital; Labour supply; Computable general equilibrium model (CGE);
    All these keywords.

    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • I26 - Health, Education, and Welfare - - Education - - - Returns to Education

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:chieco:v:59:y:2020:i:c:s1043951x19301452. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/chieco .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.