The quality of higher education and overeducation: Where should higher education funding go?

Abstract Policymakers and the public are increasingly concerned about overeducation, and how it relates to the investment of resources in higher education. This study uses Chinese data to explore the determinants of overeducation and wage effects of overeducation at different levels of quality in higher education. Empirical results suggest two factors that significantly influence the incidence of overeducation among graduating students: the practicality of curriculum and student rule-based input. Results from wage equation suggest that overeducated individuals with lower quality of higher education incur greater wage penalties. This study can inform the Chinese government's allocation of financial investments in higher education.