The overeducated Italian doctors

By Giuseppe Lucio Gaeta, Giuseppe Lubrano Lavadera, and Francesco Pastore

phdGaining a Ph.D. possibly determines positive outcomes from both an individual and a societal perspective. For candidates, doctoral education is an investment aimed at acquiring skills and competences to be used in future career. For the society as a whole those who achieve a Ph.D. are likely promoters of innovation. In order to achieve these outcomes, Ph.D. holders must be able to get job positions that allow them to fully exploit their educational background. How frequently does this occur?

A crucial question in Europe and in Italy

This question is particularly important in Europe nowadays. Starting from the Bologna Process, doctoral studies are interpreted as the third cycle of education and therefore public as well as private entities, alongside the academia, are considered as possible destinations for Ph.D. holders. This makes it very important to investigate whether the job-education matching is frequent among Ph.D. holders.

Italy is an appropriate context to investigate this issue for two main reasons. First, a remarkable growth of doctoral education has been reported in this country over recent years. Data reveals that at the beginning of the 2000s the annual number of new Ph.D. holders was approximately 3,000 while few years later, in 2006 it was higher than 10,000. Nevertheless, in 2011, the Italian graduation rate at a doctoral level was still lower than the OECD average.

Second, in Italy the size of personnel devoted to research and development (R&D) is lower than the EU28 average. Personnel working in Italian universities has been declining from 2008 (-17%, data provided by the Italian Ministry of Education, Universities and Research), while over recent years (2007-2013) an opposite increasing trend (+33%) is reported for the R&D personnel working in private firms.

Unemployment and overeducation

In 2009, ISTAT carried out a survey of Ph.D. holders who completed their studies three and five years earlier, in 2006 and in 2004, respectively. The data reveals that unemployment among Ph.D. holders is lower than what is reported for university graduates. A share as high as 92.5% of doctors who completed their studies in 2006 was working at the time of the survey and the figure is even higher in the case of those who graduated in 2004 (93.7%).

Figure 1 confirms this, while also showing that there is high heterogeneity of unemployment rates across fields of study, since Human Sciences and some of the Social Sciences perform worse than other fields. The share of Ph.D. holders working in the academia after the completion of their studies is approximately 36% with a remarkable variability among fields of study; it is higher in Mathematics and Physics and lower in Law and Life Sciences (see figure below).

unemployed-phd

Figure 1: Unemployment and university employment of Ph.D. holders.
Source: IZA DP No. 10051 based on ISTAT data.

What about the job to education matching among those who work outside of the academia? Approximately 31.28% of them report that their Ph.D. title was not useful to get the job they were carrying out when interviewed. Nevertheless this figure does not tell us anything about skills utilization.

In order to provide a more in depth analysis, we used the ISTAT self-reported data to observe for each of the respondents which of the following alternative situation applies: 1) genuine overeducation (GO) defined as holding a job for which the Ph.D. title and the skills acquired during doctoral studies are useless; 2) apparent overeducation (AO) that arises when the Ph.D. title was not useful to get the current job while doctoral competences are valuable in carrying it out; 3)  apparent matching (AM), that arises when doctoral education was useful to get the current job but Ph.D. skills are not; 4) genuine matching (GM) defined as holding a job for which both the Ph.D. title and skills acquired during doctoral studies are useful.

Figure 2 shows the incidence of these conditions among the surveyed doctorate holders who work in the extra-academic by field of doctoral studies. Data suggests that GO is particularly frequent among those who studied Philosophy, Law, Political Sciences and Human Sciences. Particularly worrying is that the sum of GO and AM results to be higher than 50% in most of the fields of study, which suggests that the application of skills acquired during Ph.D. studies is critical.

phd-matching

Figure 2: Genuine overeducation (GO), apparent matching (AM) , apparent overeducation (AO) and genuine matching (GM) among Ph.D. holders working outside the academia.
Source: IZA DP No. 10051 based on ISTAT data.

The detrimental effect of overeducation on wages

This mismatch presumably affects in a negative way the Ph.D. holders’ capacity to generate positive outcomes for the society but also individual private returns to education might be harmed by it.

To check whether the latter claim is true, our recent IZA Discussion Paper relies on the cross-sectional data presented so far. We account for the possible endogeneity of GO by proposing an instrumental variable analysis in which the instrument is represented by the incidence of GO among those who share the same profile of respondents in terms of field of study, area of residence and year of graduation.

According to the empirical investigation, GO leads to a wage penalty of approximately -9%. This effect is remarkably higher (approximately -25%) when the GO status of respondents is defined in a slightly different way, i.e. when we consider as genuinely overeducated those who hold a job for which the Ph.D. title is useless and who are totally dissatisfied with the current use of the skills acquired during their doctoral studies.

Conclusion

While most of research focuses on the career outcomes of university graduates, our essay suggests that there is also need of investigating those of doctors. Since Ph.D. holders are considered to be crucial actors in knowledge economies, incentives should be designed in order to ease the application of doctoral knowledge in non-academic jobs and support the dialogue between the academic and non-academic world in defining some specific topics for Ph.D. training.

Keeping in mind these aims, it is very important to carry out a careful assessment of projects such as the recently released Italian Ph.D.ITalents, which is specifically aimed at easing matching between supply and demand of doctors.

Read more (IZA Discussion Paper No. 10051):

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On a related note, see also Hilmar Schneider’s recent op-ed (in German) published in Wirtschaftswoche:

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How female labor supply is influenced by working neighbors and retired grandmothers

Over the last century, female labor participation has increased in almost all developed countries. The availability of child care and increased contraceptive access along with other institutional, cultural and policy changes have made it easier for women to reconcile family and career.

But while the employment gender gap is still substantial in many European countries, more recent decades have seen a flattening of this trend. In a time when progressive population aging makes an increase in female labor force participation more relevant than ever, economists are increasingly studying the factors affecting women’s labor market decisions.

Three recent IZA discussion papers investigate causal mechanisms that affect female labor supply in both Europe and the US by analyzing the influence of peer effects on women (US, Norway) or the availability of grandparents as care takers (Italy).

Neighbors affect women’s decision to work

The IZA paper by Nuno Mota (Fannie Mae), Eleonora Patacchini (Cornell University & IZA) and Stuart S. Rosenthal (Syracuse University) examines how neighborhood peers affect American women’s decision to work. The researchers use panel data from the American Housing Survey (AHS) from the years 1985 to 1993 and classify individuals into peer groups. In contrast to earlier studies that based groups on race, gender, or some other trait, the authors assume that peers can influence each other through role model effects or information spillovers and look at individual behavioral choices which align with those in the same peer group.

Their findings show that women appear to emulate the work behavior of nearby women with similar age children. Their results suggest that adding one additional working peer to a women’s adjacent neighbors increases her tendency to work by 4.5 percentage points. Adding a non-working peer reduces her tendency to work by 9 percentage points, while adding non-peers to a women’s adjacent neighbors has little influence on her decision to work.

Socio-cultural norms and the family peer effect

Addressing the same phenomenon from a different angle, the IZA paper by University of York researchers Cheti Nicoletti and Emma Tominey with Kjell G. Salvanes (NHH & IZA) uses a comparable approach but focuses on mothers only. Since the rise in female labor participation has been largely driven by women that returned to the labor market after childbirth, they analyze how the choices of peers with similar family structures affect that decision. Using Norwegian panel data that follows clusters of neighboring homes between the years 1985-1993, they show that mothers too tend to emulate the work behavior of nearby women with similar age children.

Their results show that an increase of one hour worked in a family-peer group raises the mothers’ working hours by about half an hour in the first six years after birth. Such family peer effects would imply a social multiplier of about two, meaning that a policy change which causes a direct effect on mothers’ labor supply of one working hour would be amplified by a factor of two through the indirect effect of the influence of family peers.

The study also finds a similar peer effect for mothers’ labor supply after the second childbirth, indicating that the family peer effect is not primarily driven by the mere information about potential consequences of a mother’s decisions to work. Rather, after their second childbirth, mothers can be expected to be well informed about the benefits and consequences of their decision to enter the labor market.

Thus, the researchers point instead to the importance of social and cultural norms. Furthermore, they find that the family peer effect is smaller for mothers with a university degree, leading the authors to the conclusion that the role of information transmission via peer groups is larger for less educated women.

Available grandparents increase mothers’ labor supply

Next to social norms, another more practical, but no less relevant factor affecting women’s decision to work is the availability of grandparents as babysitters. Especially in countries that spend little on public child care, parents often rely on their own parents to look after their children when they go to work. The IZA paper by University of Milan scholars Massimiliano Bratti, Tommaso Frattini and Francesco Scervini (HDCP-IRC) seeks to find out how changes in the availability of grandparents affects female labor supply.

In order to measure the effect, they investigate how three pension reforms in Italy that gradually elevated the retirement age to 65 affected the employment of women who have children under 15 years of age. They classify grandparents as ‘available’ if they are eligible for meeting the pension requirements. Italy presents an ideal case for this study, with its low rates of female employment, little formal child care provision, and the several pension reforms implemented in a relatively short time span.

The Italian researchers find that among the women studied those whose own mothers are eligible for retirement have a 13 percent higher probability of being employed than those whose mothers are ineligible. The pension eligibility of maternal grandfathers and both grandparents on the father’s side, however, has no significant effect on women’s employment probability.

The study demonstrates that the eligibility of maternal grandmothers for retirement greatly affects their availability as child care providers. Therefore, raising the retirement age without at the same time sufficiently investing in public child care may further widen the already large intergenerational and gender gaps in employment by reducing the labor force participation of young women.

Read the complete IZA Discussion Papers:

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Pocket money and part-time job: Do parents tax their children?

piggy-bankYoung adults who are still living with their parents and still in compulsory education finance their independent consumption using either parental transfers (pocket money), or by working part-time. Parents care about their own and their children’s consumption, but also about the effect that part-time work might have on their children’s study time and academic achievement, so are prepared to sacrifice some of their income to subsidize their children’s expenses.

A new IZA Discussion Paper by Angus Holford (ISER, University of Essex) investigates how parents and their teenage children interact to set the amounts of (i) pocket money and (ii) part-time work. The analysis uses data on part-time working hours, and pocket money from parents, reported by around 5,000 girls and 5,000 boys in compulsory education in England, interviewed annually between 2004 (when they were 14) and 2006 (when they were 16).

Teenage gender pay gap

At age 14, 25% of boys but only 19% of girls had a part-time job. By age 16, girls had overtaken (32% against 29%) but were earning slightly lower wages for similar hours (£4.06 against £4.34 per hour, both for about 6.5 hours a week). The propensity to offer regular allowances from parents was very similar for boys and girls, at around 80% over this period.

Children take into account the money they get from parents when deciding whether to work or not. At age 14 they are 10-15 percentage points less likely to work if they are receiving an allowance, and this gap increases to 20 percentage points by age 16. Similarly, parents are around 15 percentage points less likely to give an allowance if their child is in paid work.

Parental safety net

The empirical analysis of parents’ and children’s behavior reveals two key findings. The first is that, other things equal, parents are more likely to give regular pocket money to teenagers who will have a harder time finding a job. This includes teenagers who are younger within their academic year at school so at a disadvantage when vacancies arise in the autumn, both before the run-up to Christmas and when older cohorts leave for university; those living in areas with higher rates of adult unemployment; and those living in areas from which the nearest shops are less accessible.

This tells us that rather than being opportunistic (“these parents don’t need to pay their children not to work, so they don’t”), parents effectively ‘insure’ their child’s independent consumption against labor market difficulties outside their control. They would like them to finance their own personal spending money, but will not penalize them if this proves difficult.

More work, less pocket money

The second is that parents are less likely give regular pocket money to teenagers, the longer the teenager’s hours of part-time work. In other words, parents effectively tax their children’s earnings from part-time work, by taking away cash they would otherwise be handing over. This effect is larger for girls than boys and strongest when they are 16 years old.

The findings suggest that close to the high-stakes GCSE exams, which determine these children’s future educational and labor market opportunities, parents become more inclined to use their financial resources to reduce their child’s incentive to work, hoping they will spend more time studying instead.

Read the complete paper:

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Is your government a big spender?

In 2014, the OECD average in public social spending was about 22% of GDP, with upward trends being observed in almost every country. The question about the role and extent of state interventions is at the core of the economics profession, and most economists have been traditionally skeptic about the steady growth in the magnitude of public spending.

SOCX2014

Public social expenditure as a percent of GDP, 2007, peak-level after 2007, and 2014.
Source: OECD Social Expenditure Database.

While political scientists interpret this rising importance of the state as the outcome of the collective desires of voters, it remains unclear in how much the public debate might be based on false beliefs and expectations about the current size of government spending. If citizens are imperfectly informed about the actual extent of public expenditures, the size of government may not be well aligned with their preferences.

With these questions in mind, researchers Philipp Lergetporer, Guido Schwerdt, Katharina Werner, and Ludger Woessmann analyze in their new IZA Discussion Paper how information about actual levels of public spending affects German citizens’ support for increased public spending.

The authors devised a series of experiments in a survey with over 4,000 respondents who were randomly classified into a control and a treatment group and asked about their preferences for increased spending in Germany. Prior to the survey, the treatment group was provided with information on current levels of public spending: €227 billion on social security, €95 billion on education, €38 billion on public safety, €27 billion on defense, and €10 billion on culture. The control group, on the other hand, was not provided this information before the questions were asked.

The results summarized in Figure 1 highlight a strong correlation between the provided (or withheld) spending information and the level of support for increased spending levels. Across all domains, the informed individuals showed less support for more spending compared to individuals who did not receive the information, with the strongest differences found for  education.

The observed differences depending on access to information indicate that a sizable share of respondents hold incorrect beliefs about current spending levels. To delve deeper, in a follow-up experiment the authors confirm that the results are primarily driven by those who underestimated actual spending levels before receiving the true information, while well-informed individuals did not react to the additional information.

Taken together, the results imply that high levels of public support for growing public spending levels are actually based on  a lack of information, and providing accurate spending information may be expected to lower public support for increased government expenditure.

Read the complete IZA Discussion Paper (IZA DP No. 9968):

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What politicos get wrong in Germany’s retirement debate

Werner Eichhorst

Werner Eichhorst

A crucial reality check for all Germany’s politicians eager to hand out even more retirement benefits: They need to ensure that the – already staggering – financial burden carried by the younger members of the workforce will not rise even more.

Keeping young people motivated and willing to carry their load is of paramount importance and will be difficult enough. Any further increase may be the straw that breaks the proverbial “camel’s” back.

That’s the gist of an op-ed by Werner Eichhorst, IZA Director of Labor Policy Europe, published in Fortune [read entire article].

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Has Uber made it easier to get a ride in the rain?

new-york-manhattan-taxis-rain-1209232Standing or walking in the rain is an activity best avoided. In New York City (NYC), when faced with such inclement weather, the demand for personal transportation naturally increases. During such scenarios, taxi drivers spend less time searching for customers and could thus earn a higher wage. Nonetheless, it has been a common complaint that it is difficult to find a taxi in the rain.

As an alternative to taxis, Uber entered the NYC market in May 2011 with surge pricing and mobile driver-passenger matching technology. Surge pricing means passengers pay a higher rate for the Uber service during times of high demand, which gives incentives to Uber drivers to provide rides in inclement conditions. Uber could thus be a logical response to unmet demand during poor weather.

Is it easier to find a taxi or an Uber driver in the rain?

In a new IZA DP, Abel Brodeur (University of Ottawa & IZA) and Kerry Nield (Carleton University) examine whether the number of Uber and taxi rides increases in inclement weather conditions. Based on all Uber and taxi rides in NYC in 2014-2015, they find evidence that the number of Uber rides per hour is about 25 percent higher when it is raining, which suggests that surge pricing encourages an increase in supply. On the other hand, the number of taxi rides per hour rises by only 4 percent during this time period.

Is Uber depressing taxi demand?

The study also examines to what extent the increasing popularity of Uber in NYC is harming taxi drivers. The researchers found that the number of taxi rides per hour decreased by 8 percent after Uber entered the market. This result is consistent with a substitution from taxis to Uber cars.

Has Uber made it easier to get a ride in the rain?

The researchers then test whether it has become easier to find a ride in the rain since May 2011. They first compare the total (Uber plus taxi) number of rides in a post-Uber period to the number of taxi rides in a pre-Uber period and find that the total number of rides increased by approximately 9 percent in post-Uber years. Then, they test whether it has been relatively easier to get a ride in rainy than in non-rainy hours after May 2011. The results indicate that the total number of rides has increased proportionally more in rainy hours.

The results have important implications for the ongoing debate on whether Uber is depressing taxi demand and whether Uber increases consumers’ welfare. In particular, they highlight that Uber is substituting taxi drivers and that surge pricing seems effective in increasing labor supply.

Read the complete paper (IZA DP No. 9986):

Read also a previous paper by IZA fellow Henry S. Farber (IZA DP No. 8562):

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Now over 10,000 papers in the IZA DP series!

DP_TriviaEstablished in 1998, starting with 100 papers in the first two years, the IZA Discussion Paper series now includes more than 10,000 working papers authored by IZA researchers and network members. On average, a new IZA DP goes online every ten hours. Covering a wide range of topics in labor economics and related fields, our papers are freely available online through the IZA website and various online databases. About two-thirds of the papers have meanwhile been published in refereed journals and volumes. Click on the image for more facts&figures!

From the CEO…

“The IZA discussion paper series has had an enormous impact on establishing IZA’s reputation as a top-level research institution in labor economics – and it will continue to play a key role. Providing an efficient platform for researchers to disseminate their work at an early stage, the IZA discussion papers stimulate constructive feedback from peers. They serve as an invaluable device of scientific quality control, and I dare say this series has its own merits in shaping labor economics as an important sub-discipline within economics.”
Hilmar Schneider (CEO of IZA)

Or as the IZA network coordinator puts it…

hamermesh“The first IZA Discussion Paper appeared in April 1998.  While not there yet, the IZA Discussion Paper series is now much nearer to being, “… as the stars of the heaven, and as the sand which is upon the seashore….” [Genesis 22:17] And like the stars of the heaven, the Discussion Papers have illuminated very wide areas. They are central to the lives of professional economists, experts on labor and increasingly journalists and policy makers, and are a testimony to the usefulness of the IZA Network of scholars and experts.”
Daniel S. Hamermesh (Chief Coordinator of the IZA Network)

Here’s what our fellows say…

jjh“Throughout its history, the IZA Discussion Paper series has been a major outlet for new research in labor economics and related fields such as family economics, demographic economics and the methodology that supports serious empirical research. It provides an opportunity for very diverse scholars and methodologies to share ideas, to take fresh approaches to old problems and to pose new problems free of the threat of censoring, publication bias, or club membership bias. The series deserves the highest praise for disseminating a variety of good ideas and path-breaking analyses, and helping make economics an open and vigorous field.”
James J. Heckman (University of Chicago), 84 IZA DPs

machin“Over the years the IZA Discussion Paper series has been an invaluable resource for labour economists worldwide, and many papers have subsequently appeared in the economics profession’s leading academic journals.  To me, they have proven to be a great outlet both for my own work and for getting early previews of cutting edge research being undertaken in labour economics.”
Stephen Machin (University College London & LSE)

“The IZA Discussion Paper series has been instrumental in ensuring that my work always has the greatest visibility among the world’s best economists.  Over time, the stock of knowledge contained in this series has become quite extraordinary.  It’s an invaluable resource when reviewing what is happening not only in labor economics research, but in economics research more generally.”
Deborah A. Cobb-Clark (University of Sydney)

vanours“The IZA DP series is an ever growing ocean of knowledge about labor economics issues. The series is interesting for students who want to learn about state of the art research. The series is also interesting for experienced researchers who want to remain up-to-date with the research output of colleagues. Contributing to the series means that your work will be read and cited. I think the IZA DP series is an asset for the research community in support for the advancement of science.”
Jan C. van Ours (Tilburg University)

vivarelli“The IZA DP series is both a prompt and permanent way to disseminate your research outcomes. It is prompt since your fresh research results can be immediately transmitted to the relevant scientific community within a few weeks; it is permanent since IZA DPs are so well diffused and reputed globally that they keep on being read and downloaded for years, sometimes more read and cited than regular journal articles.”
Marco Vivarelli (Università Cattolica del Sacro Cuore – Milano),
co-author of the all-time top downloaded IZA DP

What the 10,000th IZA DP is all about…

IZA DP No. 10000 by Rasmus Landersø and James J. Heckman compares intergenerational social mobility in Denmark and the US. Denmark has a far more generous welfare state than the US. In terms of after tax and transfer income, Denmark has far greater intergenerational mobility. In terms of education, differences are especially strong at the top of the income distribution. Denmark and the US are equally mobile.

The generous welfare state of Denmark with its free education and universal childcare improves the cognitive test scores of comparably disadvantaged children. However, it weakens the incentives of those children to acquire schooling. These impaired incentives joined with the sorting of advantaged and disadvantages families into neighborhoods and schools explain the near parity in educational mobility across the two societies.

Download IZA DP No. 10000:

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