Overeducation and R&D: Theoretical Aspects and Empirical Evidence

Abstract

This work introduces R&D firms to a matching model to investigate their effect on overeducation. Moreover, we have enriched the empirical literature on the relationship between overeducation and R&D by evaluating whether the introduction of a tax credit to the R&D expenditures of Italian firms affected the PhDs’ probability of being overeducated. Our results first highlight that overeducation may be consistent with a share of graduate individuals who may be either lower (tightness dominance scenario) or higher (composition dominance scenario) than that optimally required by a social planner. Second, our model shows that the R&D incentives may decrease the likelihood of mismatches.