A new GLO Discussion Paper studies mismatch of workers in the Indian labor market: overeducated workers suffer a wage penalty and undereducated workers do not receive a wage reward as compared to their adequately educated counterparts.

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GLO Discussion Paper No. 651, 2020

Education-occupation mismatch and dispersion in returns to education: Evidence from India – Download PDF
by Grover, Shweta & Sharma, Ajay

GLO Fellow Ajay Sharma

Author Abstract: Using a national level sample survey on the labor market in India, we analyze the role of education-occupation (mis-)match (EOM) in explaining within-group dispersion in returns to education. Applying a double sample selection bias correction and Mincerian quantile wage regression estimation, the analysis reveals interesting findings. First, on average, overeducated workers suffer a wage penalty of seven percent and undereducated workers do not receive a wage reward as compared to their adequately educated counterparts. Second, the inclusion of match status reduces within-education group dispersion in returns. The finding highlights that ignoring EOM and thus, adopting a restrictive view of similarity across workers may lead to overestimation of the within-education group dispersion in returns. This study argues for focusing on EOM to increase both pecuniary and social benefits of education in terms of productivity gains and wages as well as to reduce wage dispersion.

GLO Discussion Papers are research and policy papers of the GLO Network which are widely circulated to encourage discussion. Provided in cooperation with EconStor, a service of the ZBW – Leibniz Information Centre for Economics, GLO Discussion Papers are among others listed in RePEc (see IDEAS,  EconPapers). Complete list of all GLO DPs – downloadable for free.

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