Overeducation Dynamics and Personality

Abstract

We use the 2000-2008 waves of the German Socioeconomic Panel to examine overeducation transitions. The results are based on a first-order Markov model that allows us to account for both the initial conditions problem and for potential endogeneity in attrition. We find that overeducation dynamics, especially the probability of entering overeducation, is significantly influenced by personality. Notwithstanding theses differences associated with individual heterogeneity, still there appears to be considerable overeducation persistence. Almost 18% of the overeducation risk is due to individual state dependence, i.e., the fact of having been overeducated in the previous year.