Nash bargaining and the wage consequences of educational mismatches

Michael Sattinger*, Joop Hartog

*Corresponding author for this work

Research output: Contribution to journalReview articlepeer-review

17 Citations (Scopus)

Abstract

The paper provides a theoretical foundation for the empirical regularities observed in estimations of wage consequences of overeducation and undereducation. Workers with more education than required for their jobs are observed to suffer wage penalties relative to workers with the same education in jobs that require their educational level. Similarly, workers with less education than required for their jobs earn wage rewards. These departures from the Mincer human capital earnings function can be explained by Nash bargaining between workers and employers. Under fairly mild assumptions, Nash bargaining predicts a wage penalty for overeducation and a wage reward for undereducation. This paper reviews the established empirical regularities and then provides Nash bargaining results that explain these regularities.
Original languageEnglish
Pages (from-to)50-56
Number of pages7
JournalLabour Economics
Volume23
DOIs
Publication statusPublished - Aug 2013
Externally publishedYes

Keywords

  • Mincer earnings function
  • Nash bargaining
  • Overeducation
  • Qualitative mismatches
  • Undereducation
  • Wages

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