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Klaus Nowotny - Is the 'Brain Waste' voluntary? Evidence from CEE countries

Event Type
Regional Economics Applications Lab (REAL)
219 Davenport Hall
Sep 30, 2013   12:00 pm  
Eseteban Lopez

Empirical evidence shows that even in industrialized countries a sizable share of workers is overeducated: according to meta-analyses of the literature on the "Economics of Overeducation" 26-30 % of all workers have a higher level of education than required by their job. Overeducation is particularly prevalent among migrants, indicating that the "brain drain" is often associated with a considerable "brain waste". Given that overeducation is just one aspect of the broader concept of overqualification (which encompasses overeducation and considers formal and informal skills, experience and innate ability), this brain waste has welfare costs for both sending and receiving countries. But while it is well accepted that migrants are a self-selected sample of the sending country population, migrants working in overqualified employment are also likely to be a self-selected group, a factor largely ignored by the previous literature. This paper therefore aims at analyzing the determinants of individuals' willingness to accept overqualified employment abroad.

The empirical analysis uses a unique dataset on migration and cross-border commuting intentions in three CEE countries (Czech Republic, Slovak Republic and Hungary) surveyed in 2010. While there is considerable heterogeneity across the countries considered, the data show that about one third (32.7 %) of potential migrants and cross-border commuters are willing to accept overqualified employment abroad. Regression analysis reveals that even after controlling for selection the willingness to accept overqualified employment abroad is lower for potential migrants with tertiary education and those who are undereducated or self-employed. Accepting overqualified (but better-paid) employment abroad may however be a strategy to \keep up with the Joneses" or to re-enter the labor market for discouraged workers currently out of the labor force. Generally, the results indicate that the higher incidence of overeducation among migrants and their lower returns to overeducation found in the literature may be due to negative self-selection into overqualified employment.

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