Turkish Journal of Computer and Mathematics Education Vol.12 No.3 (2021), 441-453 Research Article 441 The Effect of Over-education and Overskilling on Economic Growth across States in Malaysia: An Empirical Evidence Zainizam Zakariya* 1 , Normala Zulkifli 2 , Khoo Yin Yin 3 , AlifNawi 4 *1,2,3 PhD, Faculty of Management and Economics, Universiti Pendidikan Sultan Idris (UPSI), 35900 Tanjung Malim,Perak 4 PhD, School of Education, Universiti Utara Malaysia (UUM), Sintok, 06010 Bukit Kayu Hitam, Kedah Article History: Received: 10 November 2020; Revised: 12 January 2021; Accepted: 27January 2021; Published online: 05April 2021 Abstract: This paper explores the incidence and the outcome of educational and skill mismatchoneconomic growth across state in Malaysia from2006 and 2012.The mismatch indicators were gauged using the Job Analysis (JA) and the mode method.Using micro cross-section data from Labour Force Survey (LFS) between 2006 and 2012, overqualification (underqualification)and overskilling (underskilling) were reported between13 (20) and 19 (34) percent.Results for Fixed Effect (FE) regression demonstrated overqualification and overskilling had a favourable impact on regional growth. By contrast, the growth was negatively associated with an increase in undereducation and underskilling incidence. The findings depict that the economic performance at the regional level in Malaysia is associated with an increase in overqualification and overskilling. The presence of such incidence, therefore, may not be a sign of inefficient public investment and resources allocated to education are in fact economically beneficial at a macro-level. Keywords:over qualification, over skilling, economic growth, state, Malaysia Introduction Researchers in traditional labour market have argued that workers seek for jobs on the large or regional rather than small market due greater job opportunities provided in the former than in the latter. Yet, due to spatial mobility constraints experienced by some workers, they have looked for work on the local or small labour market(Hensen, de Vries, & Cörvers, 2009; Cabus & Somers, 2018). Job seekers whoexperienced flexibilitylimitation tend to end up in a local job that below than their actual education or skill background, resulting in overqualification(Büchel & Battu, 2002; Kulkarni, Lengnick-Hall&Martinez, 2015) or overskilling (Zakariya, Abdul, et al., 2017; Zakariya & Yin, 2017). Assessments of the degree of theconsequence of overqualification and overskillingbetween large and small labour marketmay seemdecisive for policymakers as such incidences are typically ending up in negative rather than positive outcomeseither at an individual nor at a firm level. 1 The negative outcome at both levels may drive down local economic performance and leads to an unequal distribution of economic development between smaller and larger region. Thismay seem to be truly in the context of Malaysia as differences in educational attainment, unemployment, occupationor education and skills utilisationhas led to regional income inequalities and unbalanced growth among states(Yussof & Kasim, 2003; Ragayah, 2008; Saari, Dietzenbacher, & Los, 2014; Abdullah, Doucouliagos, & Manning, 2014; Hutchinson, 2017;Zakariya, Hermanssons, Yin, Fazlin, & Noor, 2019). Nevertheless, if the supply of highly educated workers is not in line by demand at the state labour market level, then the impact of education and skill on state Growth Domestic Product (GDP) may not as high as expected relative to if the state werefully utilised the education and skills of all the mismatched workers(McGowan and Andrews, 2017; Adrian, Desislava, Ganev, & Aleksiev, 2018). 2 Yet, educational and skill mismatch incidencesmayalso in turn lead to appositive outcome on state economicgrowth. This is because the overqualified and overskilledare typically have accumulatedmore schooling and skill, hence, more 1 At an individual-level study, both overeducated and overskilled earn significantly lower than their comparable well-matched(see review in Leuven & Oosterbeek, 2011) and greater job dissatisfaction (Fleming & Kler, 2008; Di Paolo & Mañé, 2016; Verhaest & Verhofstadt, 2016). Some studies found over-education at the workplace improves firm level productivity (Jones, Jones, Latreille, & Sloane, 2009; Kampelmann & Rycx, 2012; Mahy, Rycx, & Vermeylen, 2015;Philipp Grunau, 2016). 2 A study from Wald (2004) Canada showed that over-qualification resulted in approximately 2 percent or $20 billion reduction in the Canadian Gross Domestic Product (GDP) due to lower tax revenues among the overqualified workers.