Nash Bargaining and the Wage Consequences of Educational Mismatches

12 Pages Posted: 9 Dec 2012

See all articles by Joop Hartog

Joop Hartog

University of Amsterdam - Faculty of Economics and Business (FEB); Tinbergen Institute; CESifo (Center for Economic Studies and Ifo Institute); IZA Institute of Labor Economics

Michael Sattinger

University at Albany, SUNY - Department of Economics

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 only 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, and further predicts that the wage penalty will exceed the wage reward. This paper reviews the established empirical regularities and then provides Nash bargaining results that explain these regularities.

Keywords: overeducation, undereducation, Nash bargaining, qualitative mismatches, Mincer earnings function, wages

JEL Classification: J31, J24, C78, C51

Suggested Citation

Hartog, Joop and Sattinger, Michael, Nash Bargaining and the Wage Consequences of Educational Mismatches. IZA Discussion Paper No. 7025. Available at SSRN: https://ssrn.com/abstract=2186803

Joop Hartog (Contact Author)

University of Amsterdam - Faculty of Economics and Business (FEB) ( email )

Roetersstraat 11
Amsterdam, 1018 WB
Netherlands

Tinbergen Institute

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Michael Sattinger

University at Albany, SUNY - Department of Economics ( email )

1400 Washington Avenue
Albany, NY 12222
United States
01 518 442-4761 (Phone)
01 518 442-4736 (Fax)

Register to save articles to
your library

Register

Paper statistics

Downloads
23
Abstract Views
191
PlumX Metrics