Effects of Tertiary Expansion

This paper examines crowding-out effects and the labour market match for the tertiary educated in26 OECD countries, using attainment data and data on labour market outcomes from Education at aGlance 2006. A first-difference approach is applied on a three-period, pooled country-panel to examine theeffects of changes in tertiary attainment levels against changes in labour market outcomes over time. Thepolicy questions in this paper focus on the potential negative short-term effects that mismatches betweenthe supply of and demand for higher-educated individuals might bring about.There is no evidence in the current data suggesting any crowding-out effects of lower-educated fromhigher-educated individuals. On the contrary, there seems to be positive employment effects for individualswith less education in countries expanding their tertiary education. Labour market outcomes for the uppersecondary educated appears to be less influenced by the expansion of tertiary education, but there is noindication that tertiary educated individuals, on average, are displacing (crowding out) upper secondaryeducated individuals from the labour market.Similarly, the job market for the tertiary educated appears to be little influenced by the expansion oftertiary education. There are some indications that relative unemployment (relative to upper secondary) forthe tertiary educated has been diluted to some extent, but this appears to be more related to the uppersecondary educated, relatively speaking, strengthening their labour market positions vis-à-vis tertiaryeducated individuals in general. The earnings advantage (premium) for tertiary educated individuals incomparison with upper secondary educated individuals is still on the rise, which suggests that, on thewhole, demand outstrips supply in most countries.