Workers with a college degree earn substantially more than workers with no such degree. Using recent data from 22 OECD (Organization for Economic Cooperation and Development) countries, we estimate this college wage premium at 28 per cent for male full-time working employees, on average, ranging from 18 per cent in Sweden to 50 per cent in the Slovak Republic. This premium is largely explained by the higher skill levels of graduates from higher education combined with their use of these skills at work, as well as the match with job requirements for this skill proficiency and skill use. We find no effect of labour market institutions (e.g. the employment protection legislation or the coverage rate) on cross-country differences in the college wage premium. However, we find that cross-country variation in this premium is related to the relative supply of higher educated workers. Moreover, we find evidence that cross-country differences in the college wage premium are related to the degree to which educational credentials signal skills.
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- college wage premium, skills, skill use, (mis)match, relative supply, signalling, institutions, EDUCATION, I26, J24, LABOR-MARKET, OVEREDUCATION