Credential Closure: Educational Credentialism, Skills, and Wages in Europe

Thijs Bol , University of Amsterdam

Credentialist theory argues that education affects wage returns in the labor market because educational degrees restrict access to highly-rewarding labor market positions. However, very few studies have empirically tested if the educational payoff in the labor market is indeed explained by educational barriers in the labor market. No study so far has been able to rule out that educational entry restrictions might also increase the skills of workers, potentially refuting credentialist theory. I combine new data on formal educational requirements for 12 European countries with individual level labor market data from the Programme for the International Assessment of Adult Competencies (PIAAC). Using different fixed effects regressions I estimate the wage effects of formal educational restrictions. I find that educational credentialing increases wages, but the effects are modest. Interestingly, this wage premium is not explained by skill-differences between workers in occupations with and without formal educational requirements.

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 Presented in Session 42. Educational Attainment and Labor Market Outcomes