Individual and Aggregate Mismatch in Higher Education (updated: 19 October 2023)
In many economies, many graduates are observed to work in non-graduate occupations. Does this mean that the level of education is inefficiently high? I propose a model that features uncertainty about the causal effect of HE and incorporates general equilibrium wage effects in a matching model of the labour market. My model highlights that there are two distinct notions of overeducation. Workers could be individually mismatched in the sense that they would be better off if they made alternative education choices. There could also be aggregate mismatch if average welfare would be higher if the average level of HE attendance changed. I find that uncertainty about returns generates the former, while endogenous education choice in a matching market generates the latter. Structurally estimating my model on UK data, I calculate that 32.9% of the population individually mismatched. I find in policy simulations that policy-makers can improve aggregate welfare by reducing HE share by 1.6 percentage points. Reducing uncertainty about returns is unambiguously good for workers but increases income inequality and worsens firms’ outcomes by making labour more expensive.
Presented at the 10th Warwick Economics PhD Conference (2022), University of Surrey PhD Workshop in Microeconomics (2022), Young Economist Symposium (2022), Asian & Australasian Society of Labour Economics Conference (2022), European Winter Meeting of the Econometric Society (2022), Society of Labour Economists Conference (2023), Leuven Summer Event (2023), EEA-ESEM Congress (2023), European Association of Labour Economists Conference (2023)
The Butcher, the Brewer, or the Baker: The Role of Occupations in Explaining Wage Inequality - Joint with Luke Heath Milsom (updated: 12 January 2022)
Google does not pay its canteen chefs the same premium as it does its software engineers; there is heterogeneity in pay premia within a firm. To study the implications of this observation, we estimate a two-way, worker-job, fixed effect model that builds upon the canonical model by Abowd et al. (1999) by allowing for within-firm heterogeneity. Estimating our model on UK administrative data, we find that even if workers, and firms, were identical, 25% of current log-wage variance would remain, due solely to heterogeneity between occupations. We further document that worker heterogeneity accounts for a relatively small proportion of log-wage variance, and that between-firm pay heterogeneity is more important in higher-wage occupations and larger labour markets.
Presented at the 9th Warwick Economics PhD Conference (2021), Royal Economics Society Annual Conference (2022).
Upcoming presentations: AASLE (2023), EWMES (2023)
Determinants of University Subject Choice in the UK - Draft available on request (updated: 22 February 2021)
Students applying to British universities have to choose to specialise in a particular subject at the point of application. What factors play into their choice of subject of study? I analyse students' subject choices in university using a cohort panel dataset (LSYPE), and in particular, whether those choices respond to their expected wages conditional on studying the subject. I find that earnings, defined as earnings at age 25 or as lifetime earnings, are positively associated with choice probability, although the quantitative impact of expected earnings on subject choice is small. I also find that there are substantial differences in choice probability between students of different sexes, ethnicities and to a lesser extent, socio-economic classes.