Overeducation dynamics and personality

In this paper, we use the 2000–2008 waves of the German Socioeconomic Panel to examine overeducation transitions. The results are based on a first-order Markov model that allows us to account for both the initial conditions problem and potential endogeneity in attrition. We found that overeducation dynamics, especially the probability of entering overeducation, is significantly influenced by personality. Notwithstanding these differences associated with individual heterogeneity, there still appears to be considerable overeducation persistence. Almost 18% of the overeducation risk is due to individual state dependence, that is, the fact of having been overeducated in the previous year.