Overeducation in the Labour Market: Evidence from Brazil

This paper analyses the prevalence of educational mismatch and its effects on wages in Brazil using a large employer-employee dataset. I find that half of the Brazilian labour market is mismatched, with similar proportions of over- and undereducated. Overeducated (undereducated) workers earn significantly lower (higher) than their co-workers who hold a well-matched job, and the penalty for overeducation is the same as the premium for undereducation. Moreover, the overeducation penalty is about half of the premium for going to university. Further, given the symmetry of the mismatch correcting it yields small effects on aggregate wages.