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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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  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. Jiří Večerník, 2001. "Earnings Disparities In The Czech Republic: Evidence Of The Past Decade And Cross-National Comparison," Prague Economic Papers, University of Economics, Prague, vol. 2001(3). [Downloadable!] (restricted)
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  7. 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!]
  8. 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!]
    Other versions:
  9. 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!]
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  11. 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.
  12. 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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    Other versions:
  17. 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!]
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  19. 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)
    Other versions:
  20. 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)
  21. Schultz, T. Paul, 1988. "Education investments and returns," Handbook of Development Economics, in: Hollis Chenery† & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 1, chapter 13, pages 543-630 Elsevier. [Downloadable!] (restricted)
  22. 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)
  23. 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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