Overqualification, skill mismatches and wages in private sector employment in Europe

Abstract

Abstract: This paper uses a sample of private sector male workers from the European Community Household Panel to examine the wage effects of educational mismatches across segments of the earnings distribution in 12 countries. We consider two types of mismatch, overqualification and skills mismatches. By differentiating between quantiles, we discriminate between groups of workers with different unobservable earnings conditions. We find that the detrimental effects of skill mismatches on wages are larger than those of overqualification in most segments of the earnings distribution. Moreover, we find that the pay penalty of educational mismatch tends to be higher among workers with higher unconditional wages. This finding suggests that the mismatch phenomenon entails wage losses over and above those attributable to unobservable earnings determinants, including ability and skills possessed by workers.