Regional Economic Growth in Malaysia: Does Aggregate Overqualification Matter?

Abstract

This paper explores the impact of aggregate overqualification on regional economic growth in Malaysia from 2005 to 2017 using Dynamic Panel Data (DPD) approach. The aggregate overqualification was gauged as the percentage of workers with at least a bachelor’s degree qualification who employed in an occupation below than the professional job level. Following the method, while the incidence stood at 1 percent, it was however higher in Kuala Lumpur (4.4 percent) and Selangor (3.9 percent) and was much lower in Perak (-0.26 percent) and Perlis (-0.12 percent). Moreover, the incidence was higher after 2010. Empirical findings revealed strong evidence of negative impact of the aggregate overqualification on regional economic growth. Yet, the magnitudes of the effect were smaller, between 0.02 and 0.03. Further analysis revealed the negative impact was greater in most developed states and for the period after 2010. The findings depict that there is a growth penalty for not being fully utilised the knowledge and skills of highly educated workers at the regional labour market.

The Effect of Over-education and Overskilling on Economic Growth across States in Malaysia: An Empirical Evidence

“…-over-education, overqualification and years of over-schooling are positively associated with growth, ranges from 3 to 13 percent across nine European countries. Of the three indicators, the effect was greater for the overeducation incidence (model with country and time fixed effect).In a recent study, Zakariya et al (2019)examined the outcome of aggregate overqualification on growth across region in Malaysia from 2005 to 2017 using Dynamic Panel Data (DPD) time series analysis. In the study, the aggregate overqualification was measured as the fraction of workers with at least a bachelor's degree qualification who were employed in an occupation below than the professional job level.…”

“…5 Details of the mode method are outlined inRamos et al (2012) 6. Due to data on capital formation was not available across state, the variable K was measured using capital investment received by state following Gyimah-Brempong, Paddison and Mitiku (2006)(Zakariya et al (2019).…”