This study analyzes the incidence of overeducation and undereducation and their effects on wages utilizing the data sets for the "Taiwan Social Change Survey" in 1997 and 2002. Our main conclusions are as follows. First of all, the rate of return on excess years of schooling is positive but smaller than that in relation to the required education. The rate of return on the years of deficit schooling is negative, but that the penalty is smaller than in the case of the required education. Secondly, the self-assessed overeducated workers tend to be pessimistic given their inferior promotion history, although the returns on their surplus education seem to be rather sound. By contrast, if overeducation is defined according to the method of means of realized matches, it provides a more favorable picture for the overeducated in terms of mobility history. Finally, given the current data on the limited samples, we do not regard the problems facing the young overeducated as being more serious than those facing the old cohort.
