Overeducation Problems

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At the beginning, we will present the origins of the overeducation problem, thereafter major theories behind the overeducation and empirical studies will be introduced. Finally, literature about the incidence of overeducation in Ukraine follows. 2.1. The emergence of the overeducation problem In the 1970s, Freeman (1975,1976) and Berg (1970) argued that America’s educational system produced too many college and higher graduates, which resulted in reduction of returns to education. Freeman, in particular, forecasted that this trend would continue in long-run. This strong statement turned a lot of social attention and laid the foundation for further discussion about overeducation’s effect on wages. A while later, Smith and Welch (1978) refuted…show more content…
They conducted their research based on the individual level data, which was a new thing in the topic by itself, and compare three groups of workers, those who finished in the job corresponding to their education and that required the higher or lower level of education. Moreover, Duncan and Hoffman presented a new specification of the wage equation, which allowed to estimate separately the effect of the adequate number of years required for job, years of overeducation, and years of…show more content…
For example, McGuinness (2007) pointed out that “[O]vereducation incurs significant wage costs on the individual and productivity costs on the economy that may well rise if a higher education participation continues to expand without corresponding increase in the number of graduate jobs”. Even though most scientists consent about existence of negative causal effect in wage-education relationships, there is no common point how resolve the problem. Some researchers propose to reduce the amount of schooling and resolve problem of overeducation in this way, why another propose to appoint overeducated workers to more demanding works. But it’s still uncertain who will erect this more-demanding working places and who occupies them. 2.2 Major theories of overeducation The general theory around overeducation ranges between two different theoretical frameworks: the human capital theory and the job competition model (Sloane 2003, McGuinnes 2006, Leuven and Osterbeek 2011). Duncan and Hoffman’s wage equation extends from the main human capital theory equation, Mincerian wage equation. In particular, it designates the Mincerian wage equation as: ln⁡〖w_i=δ_a S_i^a+x_i^' β+ϵ_i

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