Abstract
In this paper we analyze career dynamics for the large share of U.S. workers who have
more schooling than their peers in the same occupation. We use data from the NLSY79
combined with the CPS to analyze transitions into and out of overeducated employment,
together with the corresponding effects on wages. Overeducation is a fairly persistent
phenomenon at the aggregate and individual levels, with 66% of workers remaining overeducated
after one year. Overeducation is not only more common, but also more persistent among
blacks and low-AFQT individuals. Further, the hazard rate out of overeducation drops
by about 60% during the first 5 years spent overeducated. However, the estimation
of a mixed proportional hazard model suggests that this is attributable to selection
on unobservables rather than true duration dependence. Finally, overeducation is associated
with lower current as well as future wages, which points to the existence of scarring
effects.
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