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α: calibrated so average coauthorship-adjusted count equals average raw count
In this paper, a hedonic pairing process is modeled in which some workers may be overeducated or undereducated as an equilibrium outcome of a dynamic labor market. Undereducated workers are those whose abilities and training permit them to move into a job with higher qualifications, whereas overeducated workers are highly qualified workers who select into lower‐skill, entry‐level jobs that provide the training (or signal) necessary for promotion. The empirical model shows that these pairing types cannot be directly identified in a cross section since all workers are exactly educated during a portion of their career. However, pairing types may be imputed by comparing predicted and observed qualifications of the worker and predicted and observed requirements of the firm. Using a rich cross section and a panel of British working‐age males to identify the pairing types, we confirm the predicted career development patterns with regard to on‐the‐job training, promotion, and wages.