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Returns to Human Capital Under The Communist Wage Grid and During the Transition to a Market Economy

Author

Listed:
  • Daniel Münich

    (CERGE-EI (Prague))

  • Jan Svejnar

    (Ross School of Business and Department of Economics, University of Michigan)

  • Katherine Terrell

    (Ross School of Business and Ford School of Public Policy, University of Michigan)

Abstract

We estimate returns to human capital during communism and the transition using data on 2,284 men in the Czech Republic. We show: (a) extremely low and constant rates of return to education under the communist wage grid and dramatic increases in transition, which do not differ by firm ownership, (b) radical changes in returns to several fields of study and "sheepskin effects" in both regimes, (c) identical wage experience profile in both regimes, (d) similar 1996 returns to human capital obtained in communism and in transition, and (e) changes in the interindustry wage structure. A decomposition of the variance of wages finds individuals' unobservable effects from communism to persist into transition, but most of the variance is due to unobservable effects introduced in the transition. © 2005 President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Suggested Citation

  • Daniel Münich & Jan Svejnar & Katherine Terrell, 2005. "Returns to Human Capital Under The Communist Wage Grid and During the Transition to a Market Economy," The Review of Economics and Statistics, MIT Press, vol. 87(1), pages 100-123, February.
    • Handle: RePEc:tpr:restat:v:87:y:2005:i:1:p:100-123
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    More about this item

    JEL classification:

    • P2 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • J4 - Labor and Demographic Economics - - Particular Labor Markets

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