The return to education and skills in Italy

Abstract

Purpose -The purpose of this paper is to estimate the incidence of educational mismatch in Italy and the return to investment in education, controlling for employees' ability. Contrary to most existing studies, the heterogeneity of individual performance is measured directly through the assessment of required and provided skills. Design/methodology/approach -Based on original data including over 3,600 face-to-face interviews, this paper appraises the incidence of self-assessed educational mismatch in the Italian private sector and estimates wage models of the economic returns to educational mismatch, skill requirements and provided skills. Findings -In Italy, under-educated employees outnumber over-educated ones and returns to required education and over-education are lower than in other industrialised countries. Individual heterogeneous ability, as captured by individual skills, is a significant determinant of wage, although the inclusion of direct measures of required and provided skills does not substantially affect the estimated coefficients of the return to investment in education. Practical implications -The omission of controls for the heterogeneous ability of employees biases the results of traditional ordinary least squares (OLS) estimates of wage models. However, the bias may be small enough to make simple OLS estimates on existing cross-sectional data an acceptable compromise to provide policy makers with reasonably accurate and up-to-date information.Originality/value -The paper provides a direct appreciation of individual heterogeneity that other studies can capture only through sophisticated indirect econometric techniques. In addition, the paper extends the set of available cross-country comparisons by estimating the educational mismatch and the returns to educational and skill mismatches in the overall Italian private labour market.

Imbalanced Job Polarization and Skills Mismatch in Europe

“…Not controlling for such unobserved factors might make results biased. For cross-sectional data 17 , unobserved heterogeneity can be approximated by using a proxy for ability (Cainarca and Sgobbi 2012;Chevalier 2003;Korpi and Tåhlin 2009), splitting the sample into more homogeneous (e.g., in terms of earnings) sub-samples (Budría 2011;McGuinness and Bennett 2007) or controlling for the envi- 17 There are more options if panel data are available, but because ESS is a cross-sectional dataset, these are not reviewed here. ronment where the individual was raised (Korpi and Tåhlin 2009).…”

The effectiveness of access restriction to higher education in decreasing overeducation

“…Some researchers propose to restructure the economy to take advantage of the large supply of university graduates (Murillo et al, 2012), thus, reshaping the labour market to fit whatever the education market outputs. Others propose reshaping the education system to fit whatever the labour market demands (Guironnet and Peypoch, 2007) by, e.g., increasing the selectivity of access to universities or motivating students to choose educational tracks that fit with employers' demands (Cainarca and Sgobbi, 2012). Still others propose improving the link between the education system and the labour market (Budría, 2011), thus, changing both systems to fit each other.…”

Competencies, occupational status, and earnings among European university graduates

“…Specifically, competencies among higher education graduates have received much attention in recent years in both the economics and educational literature (Hartog, 1992, García-Aracil et al, 2004Allen et al, 2009;Heijke et al, 2003;McGuinness and Sloane, 2011;Cainarca andSgobbi, 2012, García-Aracil, 2014;McGuinness and Byrne, 2014;Sánchez-Sánchez and McGuinness, 2015;Sgobbi and Suleman, 2013;Vila et al, 2014). This interest stems from the fact that the transition from university to work has become a pivotal phase in graduates' lives, and it is important to know which competencies will enable them to take advantage of promising job opportunities from both the perspective of the individual and the viewpoint of education policy.…”