Overeducation in Arab labour markets; Incidence and determinants

Overeducation refers to an individual’s educational qualifications being higher than those required by employers. Traditionally, research on this issue has focused on developed countries due to available data and recognition of its socio-economic impacts. Recently, attention has been directed towards overeducation in developing nations, where, due to structural challenges in their labour markets, distinct and often more severe patterns of overeducation are evident. This thesis aims to examine overeducation in a sample of Arab countries, namely Egypt, Jordan, and Tunisia. Within this region, credentialism is widely recognised as a major contributor to educational mismatch. The historical role of government as the primary employer, and the emphasis placed on credentials over skills have fuelled credential inflation. Expansion in education has coincided with rising unemployment and educational mismatches, exacerbated by a decline in the role of public sector and sluggish growth in the formal private sector. Therefore, this study explores overeducation through the lens of credential theory, providing additional clarification and nuances that may not have been fully captured using the traditional neoclassical approach. The research utilises Labour Market Panel Surveys data from Egypt (1998-2018), Jordan (2014-2016), and Tunisia (2014), employing both panel data and cross-sectional econometric techniques. The objectives are threefold: firstly, to measure overeducation incidence using three common approaches—Worker Assessment (WA), Job Analyst (JA), and Realised Match (RM). Secondly, to examine the supply-side micro determinants of overeducation via logit regression. Thirdly, to assess the influence of job search methods on overeducation probabilities. Preliminary results indicate varying outcomes across measurement methods, with WA often showing the highest overeducation rates, and RM the lowest. Key determinants such as educational level and occupation type were consistent across the countries studied. Additionally, formal job search methods were found to reduce overeducation probabilities compared to informal methods. Recommendations include enhancing educational programs to commensurate with the market needs, supporting the private sector’s contribution to the economy and encouraging career counselling services.