Overeducation and its impact on wages in Vietnam

Abstract

The study uses the most recent Vietnam Household Living Standard Survey in 2014 and 2016 to describe the incidence of overeducation and estimate the wage effect of educational mismatch. Overeducation is more prevalent in male than in female groups. In addition, younger workers are more likely to be overeducated than older counterparts. Using the extended Mincer equation in which education is decomposed into over, required, and under years of schooling, the cross-sectional estimates are consistent with the literature. On the one hand, overeducated workers earn less, while undereducated workers earn more than their matched peers holding the same educational level. On the other hand, overeducated workers receive a higher wage, whereas undereducated co-workers gain a lower wage than their adequately educated colleagues. Unlike previous studies, the fixed effects model cannot be identified because of low within-individual variation. However, the panel data enables us to cross-check the years of education between two survey rounds. Although data inconsistencies exist, the estimation results are robust across different samples.