Overeducation, undereducation and asymmetric information in occupational mobility

Abstract

Due to short-term asymmetric information, overeducated and undereducated workers are shown to have different optimal strategies in seeking upward occupational mobility into their next positions. Undereducated workers typically have other human capital strengths, but these strengths are not marketable to outsiders. Overeducated workers typically have other human capital weaknesses that are not apparent to outsiders while their excess schooling is marketable in labour markets with dynamic asymmetric information. This article presents empirical evidence showing that job tenure increases the probability of upward occupational mobility more if individuals are undereducated. Moreover, the probability of finding upward occupational mobility is increased by overeducated workers engaging in firm switching. This article also validates prior empirical studies finding overeducated workers more likely to self report engaging in firm switching activities and more likely to experience upward occupational mobility than others.

Keywords:

• overeducation
• asymmetric information
• occupational mobility
• job matching

JEL Classification:

• J31
• J60