Does Over-Education Raise Productivity And Wages Equally ? The Moderating Role Of Workers' Origin And Immigrants' Background - LIDAM Discussion Paper - IRES/2022/03

We provide first evidence of the impact of over-education, among natives and immigrants, on firmlevel
productivity and wages. We use Belgian linked panel data and rely on the methodology from Hellerstein
et al. (1999) to estimate ORU (over-, required, and under-education) equations aggregated at the firm
level. Our results show that the over-education wage premium is higher for natives than for immigrants.
However, since the differential in productivity gains associated with over-education between natives and
immigrants outweighs the corresponding wage premium differential, we conclude – based on OLS and
dynamic GMM-SYS estimates – that over-educated native workers are in fact underpaid to a greater extent
than their over-educated immigrant counterparts. This conclusion is refined by sensitivity analyses, when
testing the role of immigrants’ background (e.g. region of birth, immigrant generation, age at arrival in the
host country, tenure).