What an Unfavourable Match!? The Mitigating Effect of the Employment Sector on the Relationship Between Overeducation and Job Satisfaction

Abstract

Previous research has indicated that individuals who are overeducated tend to report lower job satisfaction. I utilize 36 years of data from the German Socio-Economic Panel and employ both OLS and fixed effects estimations to investigate whether this relationship is mitigated by the employment sector. Results indicate that public sector employment has a positive interaction effect, mitigating the negative correlation between overeducation and job satisfaction. Further analyses, including the transformation of the job satisfaction scale, indicate the robustness of the results. Finally, I discuss the results in light of potential sources of heterogeneity that distinguish public and private sector employees. Although factors such as job security, risk aversion, and civic virtue cannot account for these differences, preliminary evidence suggests that individuals working in the public sector might be less penalized by overeducation, for example, in terms of wages.