Wage penalty of overeducation: New micro-evidence from China
Na Wu; Qunyong Wang;
The School of Economics, Tianjin University of Finance and Economics, Room 401, School of Economics, No. 25 Zhujiang Road, Hexi District, Tianjin 300071, PR ChinaCollaborative Innovation Centre for China Economy & Institute of Statistics and Econometrics, Nankai University, Room 705, Building of Economics School, No. 94 Weijin Road, Nankai District, Tianjin 300071, PR China
ABSTRACT:Abstract(#br)This paper studies the wage penalty of overeducation using the World Bank’s STEP (Skills Towards Employability and Productivity) survey in China. Based on the measurements of cognitive, technical, and non-cognitive skills, the overeducated have systematically lower abilities compared with the well-matched, just as the skill heterogeneity theory predicts. Endogenous switching model is adopted to estimate the effect of overeducation on wage. We find that the overeducated workers with tertiary education suffer from significant loss compared with the well-matched workers, while overeducation has no significant effect on workers with high school education. The causality inference using nearest neighbor matching and propensity score weighted regression methods reveals that our conclusions are robust.
KEYWORDS:Overeducation; Wage penalty; STEP survey of the World Bank; Treatment effect;
JOURNAL:China Economic Review