Overeducation and Earnings within an Occupation: Controlling for Occupational Heterogeneity of Nurses

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Peer-Reviewed Article

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Using data from the 2004 National Sample Survey of Registered Nurses, the role of occupational heterogeneity in the standard overeducation–required–undereducation (ORU) earnings function introduced by Duncan and Hoffman [1981. The incidence and wage effects of overeducation.Economics of Education Review 1, no. 1: 75–86] is examined. The occupational category of nursing is subdivided into numerous (as many as 267) minor occupational categories in estimating the level of required education. If occupation heterogeneity impacts the ORU earnings function, the effects are likely small as estimates of the ORU earnings functions of nurses are similar to estimates found in other standard multi-occupation studies. Subdividing nursing into minor occupational categories has a tremendous impact on the measured incidences of overeducation, particularly as the number of occupational categories increases from 17 to 39. The results are analogous to findings in the literature which show that varying the measurement of required education has a sizeable impact on incidence levels and little impact on the ORU earnings functions.