Overeducation of University Graduates: A Voluntary and Rational Choice of Individuals—The Case of Three Greek Universities

Abstract

Overeducation of university graduates is considered by many theories as a market phenomenon resulting from market imbalances, market imperfections, and/or job mobility restrictions. Thus, overeducated individuals are often considered as “victims” of labor market misfunctioning, as they are not responsible for the appearance of their overeducation. On the other hand, empirical evidence suggests that overeducation 1 ) affects various sectors of an economy, 2 ) is rather large, i.e. in EU-28 it is around 30% and 3 ) is persistent over time in many countries. In our paper, we take a different approach by considering overeducation as a voluntary rational choice taken by individuals when they decide their educational plans. We thus treat education not only as an investment in human capital, but also as a consumption good offering certain nonmonetary (psychic and social) benefits to university graduates. This approach suggests that overeducation may not be a temporary phenomenon and it will be higher than anticipated when considering education only as investment. Our data set is drawn from a small open economy, Greece, and it is based on graduates of three universities.