THE EFFECTS OF EDUCATION-JOB MISMATCH ON WAGES: A PANEL ANALYSIS OF THE TURKISH LABOR MARKET

Year 2017, Issue: 18, 339 - 354, 01.01.2017

Elif Öznur Acar

Abstract

The literature on education-job mismatch has consistently reported a negative effect of education-job mismatch, particularly overeducation, on earnings. Yet, most studies are criticized for not accounting for unobservable individual heterogeneity and measurement error in their analyses. This paper examines the impact of educational mismatch on earnings in the Turkish labor market, using the Income and Living Conditions panel data set from 2006-2010. The two potential sources of bias are addressed using panel data and instrumental variable approach. The consistent IV fixed effects estimation suggests that there is no statistically significant effect of overeducation or undereducation in workers’ earnings. The theoretical implication of the analysis is that neither individuals’ human capital nor job characteristics solely determine the level of returns, but both effects work together. Thus, at a policy making level one can argue that overeducation is a waste of resources for both the individual and society.   

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