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Returns to Schooling in Russia and Ukraine: A Semiparametric Approach to Cross-Country Comparative Analysis

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  • Gorodnichenko, Yuriy

    ()
    (University of California, Berkeley)

  • Peter, Klara Sabirianova

    ()
    (University of North Carolina, Chapel Hill)

Abstract

This study provides the first set of estimates of the returns to schooling over an extended period in Russia and Ukraine (1985-2002). There has been an increase in returns to schooling in both countries but the increase is much bigger in Russia than in Ukraine. The intriguing question is why returns to schooling in Russia and Ukraine diverged so much over the transition period while the skill composition of employment did not. Our approach in analyzing the sources of cross-country differences in returns to schooling is to compare the Mincerian earnings functions between the two countries and then to employ decomposition techniques. Using semiparametric methods, we construct counterfactual wage distributions for university and secondary school graduates for Ukraine using the distributions of Russian characteristics, returns to characteristics, and unobservables. This allows us to decompose differences in returns to schooling between the two countries due to differences in the labor market returns (price effect), differences in unobservables (residual effect), and differences in the labor force composition (composition effect). We conclude that of these three effects the price effect makes a major contribution to the observed differences in the returns to schooling.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1325.

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Length: 39 pages
Date of creation: Sep 2004
Date of revision:
Publication status: published in: Journal of Comparative Economics, 2005, 33 (2), 324-350
Handle: RePEc:iza:izadps:dp1325

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Keywords: cross-country analysis; counterfactual; decomposition; semiparametric approach; earnings function; returns to schooling; retrospective data; transition; Russia; Ukraine;

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References

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  1. Munich, Daniel & Svejnar, Jan & Terrell, Katherine, 2005. "Is women's human capital valued more by markets than by planners?," Journal of Comparative Economics, Elsevier, vol. 33(2), pages 278-299, June.
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  13. John S. Earle & Klara Sabirianova Peter, . "How Late to Pay? Understanding Wage Arrears in Russia," Upjohn Working Papers and Journal Articles jse20023, W.E. Upjohn Institute for Employment Research.
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  15. Klara Sabirianova Peter, 2003. "Skill-Biased Transition: The Role of Markets, Institutions, and Technological Change," William Davidson Institute Working Papers Series 2003-616, William Davidson Institute at the University of Michigan.
  16. Oi, Walter Y. & Idson, Todd L., 1999. "Firm size and wages," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 33, pages 2165-2214 Elsevier.
  17. Bonggeun Kim & Gary Solon, 2005. "Implications of Mean-Reverting Measurement Error for Longitudinal Studies of Wages and Employment," The Review of Economics and Statistics, MIT Press, vol. 87(1), pages 193-196, February.
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