The wage effects of overeducation across overall wage distribution on university graduates: incidence, heterogeneity and comparison

This study aims to investigate the extent to which overeducation imposes wage effects on university graduates, taking into account the individual heterogeneity due to skills and innate ability.

Using Graduates Occupation and Mobility Survey (GOMS) 2019 and Korea Dictionary of Occupations (KDOT) 2019, the overeducated and adequately educated graduates are differentiated by the job analysis (JA) measure. To unveil the masked results, the unconditional quantile regression (UQR) accompanying skills and field of study mismatches is adopted to explore the wage effects of overeducation across the overall wage distribution.

Empirical evidence shows that the incidence of overeducation is high; however, overeducated graduates only suffer a 6.5% wage loss relative to their adequately matched peers. The findings indicate that regardless of being derived from either overskilled or field of study mismatch, genuine overeducation impose a higher wage penalty at all percentiles relative to the apparent overeducation. Meanwhile, high-ability men suffer lower-wage penalties than their low-ability peers, whereas the inverted “U” pattern is exhibited for women. The theoretical hypotheses differ depending on the estimated results by gender.

Each measure of educational mismatch has been criticized for its insurmountable shortcoming. The recent graduates are likely to overstate the job requires of skills.

This paper contributes to the insufficient evidence on the multiple aspects of wage effects of overeducation by providing new and rigorous examinations and by focusing on the country experiencing rapid economic growth, industrial upgrading and educational expansion.