Returns to Education and Overeducation Risk: A Dynamic Model
- Author(s)
- Lorenzo Navarini, Dieter Verhaest
- Abstract
When individuals risk being overeducated for their jobs, returns to education might be
lower and heterogeneous. To investigate this, we develop a novel framework that decomposes returns using an expected value conditional on overeducation risks and penalties. We estimate these components using Belgian data and a dynamic model of endogenous educational choices, overeducation, and wages. Overeducated individuals experience a persistent wage penalty. However, as also medium levels of education are associated with an overeducation risk, this risk usually plays a limited and sometimes even positive role in explaining average returns. Additionally, overeducation generates heterogeneous realized returns among Master’s graduates.- Organisation(s)
- Department of Economics
- External organisation(s)
- Katholieke Universiteit Leuven
- No. of pages
- 77
- Publication date
- 01-2025
- Austrian Fields of Science 2012
- 502018 Macroeconomics
- Portal url
- https://ucrisportal.univie.ac.at/en/publications/8ec99a3b-8cfb-4970-aa3b-bb708d001580