Scandinavian Working Papers in Economics

Working Paper Series,
Stockholm University, Swedish Institute for Social Research

No 10/2007: Educational mismatch, wages, and wage growth: Overeducation in Sweden, 1974-2000

Tomas Korpi () and Michael Tåhlin ()
Additional contact information
Tomas Korpi: Swedish Institute for Social Research, Stockholm University, Postal: SE-106 91 Stockholm, Sweden
Michael Tåhlin: Swedish Institute for Social Research, Stockholm University, Postal: SE-106 91 Stockholm, Sweden

Abstract: We examine the impact of educational mismatch on wages and wage growth in Sweden. The empirical analyses, based on cross-sectional and panel data from the Level of living surveys 1974-2000, are guided by two main hypotheses: (a) that educational mismatch reflects human capital compensation rather than real mismatch, and (b) that educational mismatch is real but dissolves with time spent in the labour market, so that its impact on wages tends toward zero over a typical worker’s career. Our findings do not support these hypotheses. First, significant differences in contemporaneous economic returns to education across match categories remain even after variations in ability are taken into account. Second, we find no evidence that the rate of wage growth is higher among overeducated workers than others. Our conclusion is that the overeducated are penalized early on by an inferior rate of return to schooling from which they do not recover.

Keywords: Educational mismatch; overeducation; wages

JEL-codes: J24; J31; J62

41 pages, September 20, 2007

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