The Incidence and Wage Effects of Overeducation Using the Worker's Self-Assessment of Skill Utilization

This paper proposes an improved concept of educational mismatch that combines a statistical measure of over- and undereducation with the worker's self-assessment of skill utilization. In that way, we account for worker heterogeneity in skills whose omission may generate biased estimates of the incidence and wage effects of over- and under-education. Using cross-sectional data from the Swiss Household Panel survey, the empirical analyses provide the following results: (a) at least two third of the statistically defined overeducated workers perceive their skills as adequate for the job they hold and are then apparently overeducated; (b) among the overeducated with a given schooling level, the wage return to education is lower for those who are mismatched in skills than for those who are not; (c) apparently overeducated workers have similar wage returns compared to others with the same schooling level but who are statistically matched. These findings confirm that most of those overeducated according to the statistical measure have unobserved skills that allow them to work in a job for which they are well-matched