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Returns to Skills and the Speed of Reforms: Evidence from Central and Eastern Europe, China, and Russia

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Author Info
Belton M. Fleisher ()
Klara Sabirianova Peter ()
Xiaojun Wang

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Abstract

We explore the pace of increase in returns to schooling during the transition from planning to market over time across a number of Central and Eastern European countries, Russia, and China. We use metadata from 33 studies of 10 transition economies covering a period from 1975 through 2002. Our empirical model is an attempt to account for cross-section and over-time variation in rates of return as a function of the timing, speed, and volatility of reform processes as well as estimation methods used and sample characteristics. Our principal aim is to investigate the relative strength of two hypotheses: (1) the speed of economic transformation from planning to market represent the relaxation of legal, regulatory, and institutional constraints on wage-setting behavior, leading directly to adjustment returns to schooling to market rates; 2) the rapid increase in returns to schooling during the early reform period reflects the ability of highly-educated individuals to respond to changing opportunities in a disequilibrium situation. We find that both the speed of reforms and the degree of economic disequilibrium as reflected in macroeconomic volatility help to explain cross-country differences in the time paths of the returns to schooling. We report the systematic effects of sample characteristics, estimation methods, and model specifications on estimated returns to schooling.

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Paper provided by William Davidson Institute at the University of Michigan Stephen M. Ross Business School in its series William Davidson Institute Working Papers Series with number 2004-703.

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Length: 34 pages
Date of creation: 01 Jun 2004
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Handle: RePEc:wdi:papers:2004-703

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Related research
Keywords: returns to schooling skills speed of reforms meta-analysis transition Central and Eastern Europe China Russia.

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Find related papers by JEL classification:
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
O15 - Economic Development, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
P2 - Economic Systems - - Socialist Systems and Transition Economies
P3 - Economic Systems - - Socialist Institutions and Their Transitions
P5 - Economic Systems - - Comparative Economic Systems

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Münich, Daniel & Svejnar, Jan & Terrell, Katherine, 1999. "Returns to Human Capital Under the Communist Wage Grid and During the Transition to a Market Economy," CEPR Discussion Papers 2332, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  2. Fleisher, Belton M. & Wang, Xiaojun, 2005. "Returns to schooling in China under planning and reform," Journal of Comparative Economics, Elsevier, vol. 33(2), pages 265-277, June. [Downloadable!] (restricted)
    Other versions:
  3. C Dougherty, 2003. "Why is the Rate of Return to Schooling Higher For Women Than For Men?," CEP Discussion Papers dp0581, Centre for Economic Performance, LSE. [Downloadable!]
  4. Li, Haizheng, 2003. "Economic transition and returns to education in China," Economics of Education Review, Elsevier, vol. 22(3), pages 317-328, June. [Downloadable!] (restricted)
  5. Xiaogang Wu & Yu Xie, 2002. "Does the Market Pay Off? Earnings Inequality and Returns to Education in Urban China," William Davidson Institute Working Papers Series 454, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
  6. 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 Stephen M. Ross Business School. [Downloadable!]
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  7. Nauro F. Campos & Dean Jolliffe, 2002. "After, Before and During: Returns to Education in the Hungarian Transition," William Davidson Institute Working Papers Series 475, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
  8. Orley Ashenfelter & Colm Harmon & Hessel Oosterbeek, 2000. "A Review of Estimates of the Schooling/Earnings Relationship, with Tests for Publication Bias," NBER Working Papers 7457, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  9. Byron, Rayond P & Manaloto, Evelyn Q, 1990. "Returns to Education in China," Economic Development and Cultural Change, University of Chicago Press, vol. 38(4), pages 783-96, July.
  10. Denny, Kevin & Harmon, Colm & Lydon, Raemonn, 2002. "Cross Country Evidence on the Returns to Education: Patterns and Explanations," CEPR Discussion Papers 3199, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  13. Appleton, Simon & Knight, John & Song, Lina & Xia, Qingjie, 2002. "Labor retrenchment in China: Determinants and consequences," China Economic Review, Elsevier, vol. 13(2-3), pages 252-275. [Downloadable!] (restricted)
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  15. Jiri Vecernik, 2001. "Earnings Disparities in the Czech Republic: Evidence of the Past Decade and Cross-National Comparison," William Davidson Institute Working Papers Series 373, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
  16. 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, ILR School, Cornell University, vol. 51(3), pages 401-423, April.
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  18. Tito Boeri & Katherine Terrell, 2002. "Institutional Determinants of Labor Reallocation in Transition," Journal of Economic Perspectives, American Economic Association, vol. 16(1), pages 51-76, Winter. [Downloadable!] (restricted)
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  19. Jamison, Dean T. & Van der Gaag, Jacques, 1987. "Education and earnings in the People's Republic of China," Economics of Education Review, Elsevier, vol. 6(2), pages 161-166, April. [Downloadable!] (restricted)
  20. Brainerd, Elizabeth, 1998. "Winners and Losers in Russia's Economic Transition," American Economic Review, American Economic Association, vol. 88(5), pages 1094-1116, December. [Downloadable!] (restricted)
  21. Orazem, Peter F. & Vodopivec, Milan, 1997. "Value of human capital in transition to market: Evidence from Slovenia," European Economic Review, Elsevier, vol. 41(3-5), pages 893-903, April. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Mitra, Pradeep & Yemtsiv, Ruslan, 2006. "Increasing inequality in transition economies : is there more to come?," Policy Research Working Paper Series 4007, The World Bank. [Downloadable!]
  2. Yuriy Gorodnichenko & Klara Sabirianova Peter, 2004. "Returns to Schooling in Russia and Ukraine: A Semiparametric Approach to Cross-Country Comparative Analysis," William Davidson Institute Working Papers Series 719, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
    Other versions:
  3. Xiaojun Wang & Belton M. Fleisher & Haizheng Li & Shi Li, 2007. "Access to Higher Education and Inequality: The Chinese Experiment," IZA Discussion Papers 2823, Institute for the Study of Labor (IZA). [Downloadable!]
  4. Daniela Andren & John S. Earle & Dana Sapatoru, 2004. "The Wage Effects of Schooling under Socialism and in Transition: Evidence from Romania, 1950-2000," Staff Working Papers 04-108, W.E. Upjohn Institute for Employment Research. [Downloadable!] (restricted)
    Other versions:
  5. G. Reza Arabsheibani & Altay Mussurov, 2006. "Returns to Schooling in Kazakhstan: OLS and Instrumental Variables Approach," IZA Discussion Papers 2462, Institute for the Study of Labor (IZA). [Downloadable!]
  6. J. David Brown & John S. Earle & Vladimir Vakhitov, 2006. "Wages, Layoffs, and Privatization: Evidence from Ukraine," Staff Working Papers 06-126, W.E. Upjohn Institute for Employment Research. [Downloadable!] (restricted)
    Other versions:
  7. Orazem, Peter & Glewwe, Paul & Patrinos, Harry, 2007. "The Benefits and Costs of Alternative Strategies to Improve Educational Outcomes," Staff General Research Papers 12853, Iowa State University, Department of Economics. [Downloadable!]
  8. Fleisher, Belton M. & Li, Haizheng & Li, Shi & Wang, Xiaojun, 2004. "Sorting, Selection, and Transformation of the Return to College Education in China," IZA Discussion Papers 1446, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  9. Rutkowski, Jan, 2006. "Labor market developments during economic transition," Policy Research Working Paper Series 3894, The World Bank. [Downloadable!]
  10. Belton M Fleisher & Haizheng Li & Shi Li & Xiaojun Wang, 2005. "Sorting, Selection, and Transformation of Return to College Education in China," Working Papers 200507, University of Hawaii at Manoa, Department of Economics. [Downloadable!]
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