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The Educated Russian's Curse: Returns to Education in the Russian Federation

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  • Hugo Benitez-Silva

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  • Sofia Sheidvasser
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    Abstract

    This paper uses the only representative sample of the Russian Federation, the Russian Longitudinal Monitoring Survey, to estimate the returns to education in this ex-communist country. This is one of the first studies to tackle this classic issue in labor economics with the realistic expectation of obtaining results for Russia comparable in quality and reliability to those available in developed countries and other economies in transition. Using standard regression techniques we find that the returns to education in Russia are quite low compared with those reported in the literature on countries throughout the world, in almost no specification reaching higher than 5\%. Moreover, there is virtually no improvement in returns to education in the 1992-99 period, a result somewhat at odds with the suggestion of several studies using Russian data from the early 1990s. When we instrument our main regressor using policy experiments from the 1960s, we find comparable results. We also perform a selectivity correction and discover even lower returns to education for men, although they become slightly higher for women. Additionally, we find extremely low returns to tenure, which can even become negative in certain specifications. These results present a bleak perspective for educated Russians, with negative implications for investments in education at all levels, auguring the imminent erosion of one of Russia's few assets not yet completely devalued, the human capital of its citizens.

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    File URL: http://www.sunysb.edu/economics/research/papers/2000/00-05.pdf
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    Bibliographic Info

    Paper provided by Stony Brook University, Department of Economics in its series Department of Economics Working Papers with number 00-05.

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    Length: 38 pages
    Date of creation: 2000
    Date of revision:
    Handle: RePEc:nys:sunysb:00-05

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    Postal: Stony Brook, NY 11794-4384
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    Web page: http://www.stonybrook.edu/economics
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    Related research

    Keywords: Returns to Education; Russia; Economic Transition; Instrumental Variables; Selectivity Correction;

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    References

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    1. Wu, De-Min, 1973. "Alternative Tests of Independence Between Stochastic Regressors and Disturbances," Econometrica, Econometric Society, vol. 41(4), pages 733-50, July.
    2. George Psacharopoulos, 1985. "Returns to Education: A Further International Update and Implications," Journal of Human Resources, University of Wisconsin Press, vol. 20(4), pages 583-604.
    3. Jacob Mincer, 1958. "Investment in Human Capital and Personal Income Distribution," Journal of Political Economy, University of Chicago Press, vol. 66, pages 281.
    4. Newell, Andrew & Reilly, Barry, 1997. "Rates of Return to Educational Qualifications in the Transitional Economies," Discussion Papers in Economics 03/97, Department of Economics, University of Sussex.
    5. Anders Åslund & Peter Boone & Simon Johnson, 1996. "How to Stabilize: Lessons from Post -communist Countries," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(1), pages 217-314.
    6. Filer, Randall K. & Jurajda, Stepan & Planovsky, Jan, 1999. "Education and wages in the Czech and Slovak Republics during transition," Labour Economics, Elsevier, vol. 6(4), pages 581-593, November.
    7. Harmon, Colm & Walker, Ian, 1995. "Estimates of the economic return to schooling for the United Kingdom," Open Access publications from University College Dublin urn:hdl:10197/647, University College Dublin.
    8. Robert S. Chase, 1998. "Markets for communist human capital: Returns to education and experience in the Czech republic and Slovakia," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 51(3), pages 401-423, April.
    9. Topel, Robert H, 1991. "Specific Capital, Mobility, and Wages: Wages Rise with Job Seniority," Journal of Political Economy, University of Chicago Press, vol. 99(1), pages 145-76, February.
    10. Griliches, Zvi, 1977. "Estimating the Returns to Schooling: Some Econometric Problems," Econometrica, Econometric Society, vol. 45(1), pages 1-22, January.
    11. Maurer-Fazio, Margaret, 1999. "Earnings and education in China's transition to a market economy Survey evidence from 1989 and 1992," China Economic Review, Elsevier, vol. 10(1), pages 17-40.
    12. Gregory, Paul R & Kohlhase, Janet E, 1988. "The Earnings of Soviet Workers: Evidence from the Soviet Interview Project," The Review of Economics and Statistics, MIT Press, vol. 70(1), pages 23-35, February.
    13. Heckman, James J, 1979. "Sample Selection Bias as a Specification Error," Econometrica, Econometric Society, vol. 47(1), pages 153-61, January.
    14. Katz, Katarina, 1999. "Were there no returns to education in the USSR? Estimates from Soviet-period household data," Labour Economics, Elsevier, vol. 6(3), pages 417-434, September.
    15. Schultz, Theodore W, 1975. "The Value of the Ability to Deal with Disequilibria," Journal of Economic Literature, American Economic Association, vol. 13(3), pages 827-46, September.
    16. Hugo Benitez-Silva & Moshe Buchinsky & Hiu-Man Chan & Sofia Cheidvasser & John Rust, 1999. "How Large is the BIas in Self-Reported Disability Status?," Department of Economics Working Papers 99-02, Stony Brook University, Department of Economics.
    17. Stanovnik, Tine, 1997. "The returns to education in Slovenia," Economics of Education Review, Elsevier, vol. 16(4), pages 443-449, October.
    18. Card, David, 1999. "The causal effect of education on earnings," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 30, pages 1801-1863 Elsevier.
    19. Hausman, Jerry A, 1978. "Specification Tests in Econometrics," Econometrica, Econometric Society, vol. 46(6), pages 1251-71, November.
    20. Newell, Andrew & Reilly, Barry, 1996. "The gender wage gap in Russia: Some empirical evidence," Labour Economics, Elsevier, vol. 3(3), pages 337-356, October.
    21. Brainerd, Elizabeth, 1998. "Winners and Losers in Russia's Economic Transition," American Economic Review, American Economic Association, vol. 88(5), pages 1094-1116, December.
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    Cited by:
    1. Pastore, Francesco & Verashchagina, Alina, 2006. "Private returns to human capital over transition: A case study of Belarus," Economics of Education Review, Elsevier, vol. 25(1), pages 91-107, February.
    2. Flabbi, Luca & Paternostro, Stefano & Tiongson, Erwin R., 2007. "Returns to education in the economic transition : a systematic assessment using comparable data," Policy Research Working Paper Series 4225, The World Bank.
    3. Sergei Guriev & Barry W. Ickes, 2000. "Microeconomic Aspects of Economic Growth in Eastern Europe and the Former Soviet Union, 1950-2000," William Davidson Institute Working Papers Series 348, William Davidson Institute at the University of Michigan.
    4. Fleisher, Belton M. & Wang, Xiaojun, 2004. "Skill differentials, return to schooling, and market segmentation in a transition economy: the case of Mainland China," Journal of Development Economics, Elsevier, vol. 73(1), pages 315-328, February.

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