Over-education in Cyprus : micro and macro determinants, persistence and state dependence. A dynamic panel analysis

We use longitudinal panel data from the EU-SILC for the period 2005-2011 to examine the micro and macro determinants, persistence and dynamics of overeducation. The key contribution in terms of the determinants of over-education is the inclusion of macro-level explanatory variables to control for both aggregate supply and aggregate demand labour market conditions. Their effects are found to be strongly significant and to have the expected sign. The article also disentangles the effect of past over-education experience on the likelihood of current over-education. Results demonstrate that over-education is not only a long-run phenomenon for many workers but also that current over-education is largely due to past circumstances of the individual with this state dependence present at all career stages.