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The ten chapters presented in this monograph were originally presented at the conference of the Applied Econometrics Association, Maastricht in May, 1997. This publication seeks to contribute to the scientific knowledge base regarding the economic impact of education and training. The emphasis in the contributions is on the returns of education and training. Problems regarding the functioning of the labour market and unemployment are also addressed. This book is organised into three broad parts. The first part, 'Education', contains the following chapters: On returns to education: wandering along the hills of ORU Land / Joop Hartog; A stochastic dynamic programming model of education choices in Sweden / Christian Belzil and Jorgen Hansen; The choice of a discipline at university: risk versus returns / Denis Rochat and Jean-Luc Demeulemeester; The effects of school quality on pupil outcomes: an overview / Peter Dolton and Anna Vignoles; On trickling chimneys and other unemployment misery / Adriaan van Zon, Huub Meijers and Joan Muysken. The second part, 'Training', contains these chapters: Mismatch between occupation and education and the costs and benefits of job-related training / Patrick van Eijs and Hans Heijke; Over/undereducation and specific training in Spain: complementary or substitute components of human capital? / Pilar Beneito, Javier Ferri, Maria Luisa Molto and Ezequiel Uriel; Vocational training and the poaching externality: evidence for France / Laetitia Hocquet; Technological change and skill obsolescence: the case of German apprenticeship training / Doris Blechinger and Friedhelm Pfeiffer. The third part, 'Perspectives', contains one chapter: Technology, globalisation and employment: analytical and policy challenges / Luc Soete.

This chapter examines the earnings function known as over-, required and undereducation (ORU) specified in 1981 by Duncan and Hoffman. Statistical testing shows that results analysed according to the ORU formula are superior to analyses by the Mincer (relating years of schooling to earnings) and 'job competition' (relating only required education for a job to earnings) specifications. Tables demonstrating the change in over-, required and undereducation for specified groups in several countries over designated periods of time are shown. In summary, Hartog notes that after the initial entry into the workforce, a selection process occurs whereby the more capable workers are promoted to positions for which they are then undereducated. He argues that rate of return studies should be structured so that wage function is investigated in relation to both supply and demand of the labour market, and in relation to seeking a better match between jobs and workers.

In this chapter, a theoretical framework is developed for measuring the quality of match between jobs and types of education. The authors assert that it is possible to identify the type of education that is advantageous for particular occupations. The consequences of a mismatch are investigated in terms of costs and benefits of job-related training being required to close the gap between required and existing skills. The authors identify a clear link between educational level and the occupation level at which this educational level has an advantage. They estimate that there is an inverse link between educational level and internal rate of return for low and intermediate occupational levels on job-related training, the rate of return increasing with the educational level. Learning ability is then identified as being a more important factor, in that the more highly educated benefit from their learning ability, and are better able to close the gap between required and existing skills.