Estimating the Returns to Educational Mismatch with Panel Data: The Role of Unobserved Heterogeneity
IRES Discussion Papers 2011-36, UCLouvain
27 Pages Posted: 16 Jul 2013
Date Written: June 20, 2011
Using longitudinal data from the Swiss Household Panel, this analysis suggests that the cross-sectional estimates of the returns to educational mismatch are significantly biased when unobserved heterogeneity is omitted in the wage equation. The results of the standard fixed effects model indeed demonstrate that the wage returns to education are independent of the job requirements. Hence, this empirical analysis supports the human capital interpretation of the Swiss labour market.
Keywords: Educational mismatch, wages, panel data analysis, human capital
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