Overeducation and Earnings in Croatia: Evidence from PIACC

Abstract

The aim of this paper is to identify the incidence of overeducation,
its determinants, and its impact on workers' wages in
Croatia. The analysis was conducted on a sample of respondents
from Croatia using data from the 2022 and 2023 PIAAC
survey. Overeducation was measured subjectively by comparing
respondents' level of formal education with the level of education
they themselves considered necessary for their work. A total of
30.3% of respondents stated that their work did not fully utilise
their educational qualifications. To analyse the determinants of
overeducation, the Heckman selection model was used to correct
for possible bias in the sample due to the inclusion of only
employed respondents. Area of education, experience, and business
ownership were found to be statistically significant determinants
of overeducation. The impact of overeducation on wages
was assessed using a regression model, which found that overeducated
employees earn statistically significantly less than colleagues
with similar educational qualifications who perform jobs
corresponding to their level of education.