Education, Educational Mismatch, and Wage Inequality: Evidence for Spain

Budria, Santiago and Moro-Egido, Ana (2004): Education, Educational Mismatch, and Wage Inequality: Evidence for Spain.

Abstract

In this paper we explore the connection between education and wage inequality in Spain for the period 1994-2001. Drawing on quantile regression, we describe the conditional wage distribution of different populations groups. We find that higher education is associated with higher wage dispersion. According to this, the educational expansion that took place in Spain over the last years contributed to raise wage inequality through the within- dimension. A contribution of the paper is that we explicitly take into account the fact that workers who are and workers who are not in jobs commensurate with their qualifications have a different distribution of earnings. We differentiate between three different types of educational mismatch: ‘over-qualification’, ‘incorrect qualification’, and ‘strong mismatch’. We find that while over-qualification and incorrect qualification are not associated with lower wages, strong mismatch carries a pay penalty that ranges from 13% to 27%. Thus, by driving a wedge between matched and mismatched workers, the incidence of strong mismatch contributes to enlarge wage differences within education groups. We find that over the recent years, the proportion of strongly mismatched workers rose markedly in Spain, contributing towards further within-groups dispersion.

• Item Type: MPRA Paper
• Language: English
• Keywords: Returns to education; educational mismatch; quantile regression
• Subjects: C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C29 - Other; D - Microeconomics > D3 - Distribution > D31 - Personal Income, Wealth, and Their Distributions

References

Alba-Ramírez, A. (1993), Mismatch in the Spanish Labour Market. Overeducation?, Journal of Human Resources 28, 259–278. Alba-Ramírez, A. and M. Blázquez (2002), Types of Job Match, Overeducation, and Labour Mobility in Spain, in Büchel, F., A. de Grip and A. Meitens (eds), Overeducation in Europe: Current Issues in Theory and Policy. Edward Elgar Publishing, Cheltenham, UK. Asplund, R. and E. Barth (2005), Education and Wage Inequality in Europe: A Literature Review. The Research Institute of the Finnish Economy, Helsinki 2005. Barceinas, F., J. Oliver, J.L. Raymond and J.L. Roig (2000), Private rates of return to human capital in Spain: new evidence. Fundación de las cajas de ahorro confederadas para la investigación económica y social, Working Paper 162/2000. Battu H., C. Belfield and P. Sloane (1999), “Mismatch among graduates: a cohort view”, Education Economics, 7, 21-38. Buchinsky, M. (1994), Changes in the US Wage Structure 1963-1987: Application of Quantile Regression, Econometrica 62, 405-458. Buchinsky, M. (1998), Recent advances in quantile regression models: a practical guideline for empirical research, Journal of Human Resources 33, 88-126. Budría, S. and P. Pereira (2005), Educational Qualifications and Wage Inequality: Evidence for Europe, IZA Discussion Paper 1763. Cantó, O., A.R. Cardoso, C. Farinha, M. Izquierdo and J.F. Jimeno (2000), Integration and Inequality: Lesson from the Accessions of Portugal and Spain to the EU. FEDEA Working Paper 2000-10. Chevalier, A. (2003), Measuring mismatch, Economica 70, 509-531. De la Rica, S., J.J. Dolado and V. Llorens (2005), Ceiling and Floors: Gender Wage Gaps by Education in Spain, IZA Discussion Paper 1483. Dolton, P. and A. Vignoles (2000), The incidence and effects of mismatch in the UK graduate labour market, Economics of Education Review 19, 179-98 Dolton, P. and M. Silles (2001), Mismatch in the Graduate Labour Market: Some Evidence from Alumni Data. Centre for the Economics of Education, Discussion Paper Series, 9. Fersterer, J. and R. Winter-Ebmer (2003), Are Austrian Returns to Education Falling Over Time?, Labour Economics 10(1), 73-89. Gardeazábal, J. and A. Ugidos (2004), Measuring the gender gap at different quantiles of the wage distribution, Journal of Population Economics 44, 224–236. Gosling, A., S. Machin and C. Meghir (2000), The changing distribution of Male Wages in the UK, Review of Economic Studies 67, 635-666. Green, F., S. McIntosh and A. Vignoles (1999), Overeducation’ and Skills – Clarifying the Concepts, Centre for Economic Performance, London School of Economics, 1-54. Groot, W. (1996), The incidence of, and returns to overeducation in the UK, Applied Economics 28, 1345-1350. Groot, W. and H. Van den Brink (2000), Overeducation in the Labor Market: A Meta-Analysis, Economics of Education Review 19, 149-158. Hartog, J. (2000), Mismatch and earnings: where are we, where should we go, Economics of Education Review 19, 131-147. Hartog, J. and Oosterbeek, H. (1988), Education, allocation and earnings in the Netherlands: overschooling?, Economics of Education Review 7, 185-194 Hartog, J., P. Pereira and J.A. Vieira (2001), Changing Returns to Education in Portugal during the 1980s and Early 1990s: OLS and Quantile Regression Estimators, Applied Economics 33, 1021-1037. Machin, S. (1996), Wage Inequality in the UK, Oxford Review of Economic Policy, 12(1), 47-64. Martins, P. and P. Pereira (2004), Does Education Reduce Wage Inequality? Quantile Regressions Evidence from Fifteen European Countries, Labour Economics, 11(3), 355-371. OECD (2004), Education at a Glance. Paris. Sattinger, M. (1993), Assignment models of the distribution of earnings, Journal of Economic Literature 31, 831-880. Sicherman, N. (1991), Mismatch in the Labor Market, Journal of Labor Economics 9(2), 101-122. Sloane, P. J. (2002), Much Ado About Nothing? What does the Mismatch Literature really Tell Us? Keynote Address, International Conference on Mismatch in Europe: What Do We Know? 22-23 November, Berlin. Sloane, P.J., H. Battu and P.T Seaman (1999), Mismatch, Undereducation and the British Labour Force, Applied Economics 31(11), 1437–1453. Verdugo, R. and N.T. Verdugo (1989), The impact of surplus schooling on earnings: Some additional findings, Journal of Human Resources 24, 629-695.