Abstract: While social skills seem to gain importance in the workplace, other skills may become less relevant. The evolution in skill demand and supply directly affects wage returns to skills over time. However, estimating returns to skills is challenging: a potential bias comes from unmeasured ability differences, and there is an indirect return through college. This paper estimates direct and indirect returns to skills, controlling for unmeasured ability differences, using a novel dynamic model with endogenous cognitive, social, and diligence skills. In Germany, across recent cohorts, returns to social skills grew by 6 percentage points across cohorts. Due to routine task displacement and sorting into routine-intensive occupations, returns to diligence skills for low-cognitive individuals dropped by 10 percentage points. 

Abstract: We examine the impact of internship experience during secondary education on students’ schooling and early labour market outcomes by analysing unique, longitudinal data from Belgium. To control for unobservable differences between students with and students without internship experience, we estimate a dynamic discrete choice model. In line with literature on vocational education, we find that internship experience has a positive effect on one’s employment chances up to 5 years after graduation. This positive effect is mainly explained by a positive direct employment effect. Although we also find a positive indirect employment effect through a higher chance to obtain a secondary education qualification, this is largely compensated by negative indirect effects through lower tertiary education attainment.  

Abstract: We estimate a Dynamic Discrete Choice Model to investigate the causal relationship between educational attainment, overeducation in the first job after graduation and subsequent wages. Moreover, we introduce a novel decomposition approach to analyze how overeducation risk affects the expected (unconditional) wage returns to educational attainment and their distribution. To this end, we rely on longitudinal Belgian data. We find initial overeducation to generate a wage penalty that persists at least up until age 29. Even so, the effect of overeducation risk on the expected return to college is found to be moderate at best and, in some cases, even positive. This is partly due to a reduced overeducation risk that results from obtaining a bachelor’s degree, most likely as a consequence of job polarization. We also find overeducation to generate substantial heterogeneity in realized (ex-post) returns to education. Overall, these results suggest overeducation to be much more indicative of search and matching frictions on the labour market rather than of considerable overinvestments in higher education.