(notwithstanding its poor quality) in order to be able to send a signal to potential employers. Such individuals may end up being overeducated, but this could be better (in terms of earnings, for example) than being adequately matched with a lower level of education. Such a strategy is possible because society in this case – not the individual – bears the cost of providing the signal (Chevalier 2003).

Related to this discussion is the process of **_self-selection_** .<sup>10</sup> Overeducated workers may be characterized by below-average ability compared with adequately matched workers with the same level of education.<sup>11</sup> As Büchel and Mertens (2000) argue, why should the overeducated, whose career path until now has revealed that they are not able to get a job that matches their formal qualifications, perform differently in the future? According to this view, overeducation should be seen as an indicator of underachievement. If this is the case, there is reason to be concerned about the future career prospects of overeducated workers. Sloane et al. (1999), for example, do not find evidence that the matches of overeducated workers improve with a change of employer. Rather, overeducated workers seem more prone to dismissal and have more unemployment spells. This view does not, however, take account of other factors such as discrimination, which may (as discussed above) force immigrants to take jobs for which they are overqualified simply to get a job at all.

Summing up, the existing literature presents a patchwork of possible explanations for overeducation – some complementary, others contradictory. In the following, we will conduct an empirical investigation of the phenomenon as it plays itself out in the context of the Danish labor market.

# **3. Data description**

The empirical analysis uses two large data sets originating from administrative registers. The first data set contains information on the entire population of immigrants living in Denmark. The second data set consists of a 10% sample of the native Danish population. Young individuals are added to the sample each year, ensuring that the sample is representative each year. Both data sets used in this study cover the period 1995-2002. We have chosen to restrict the two data sets as follows: We examine only first-generation, non-Western immigrants because this is the group of foreigners that have the greatest difficulties in terms of labor market integration. Moreover, most second-generation immigrants in Denmark are still fairly young and therefore have not yet

> 10 Concerning immigrants, self-selection may also occur in the migration decision itself. Given the costs (economic and social) involved in migrating, it may be that the abilities of migrants from different source countries differ because they self-select from “different sections of the skill distribution of their home countries.” (Mattoo et al. p.2) With reference to the U.S. labour market, Mattoo et al. (2005) argue that “[f]or higher GDP countries, the opportunity cost of migrating is high, and so only individuals with high income potential would emigrate to and remain in the United States.” [...] ”For countries with per capita GDP substantially lower than that of the United States, the relative distribution of income is irrelevant and it can be assumed that both low and high ability individuals would wish to migrate. But it is conceivable that in some of the poorest countries only the more capable have the means to migrate.” (Mattoo et al. 2005, p.16)

> 11 Conversely, undereducated workers are taken to exert above-average abilities and to be more successful in their career, up to the point of time when their qualification mismatch was observed, than what can be expected from their (relatively low) educational attainments. As Büchel and Mertens (2000) argue, why should they not continue to be extraordinarily successful in their future career?

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