Signalling and Screening in a Transition Economy: Three Empirical Models Applied to Russia

Education is the augmentation of the stock of skills, knowledge and understanding possessed either by individuals or by society as a whole. Therefore any study of the economics of education and training concerns the manner in which choices affecting this stock are made. This paper uses the Russian Longitudinal Monitoring Survey (RLMS), a household-based survey designed to measure systematically the reforms in Russia, for the years 1994-98. We examine the true function of education, whether it is productivity enhancing or whether it acts simply as a signalling device. We test two versions of the screening hypothesis, the strong screening hypothesis (SSH) and the weak screening hypothesis (WSH), by employing three empirical signalling models. Results suggest, in the case of Russia, that although there are significant and positive returns to education and training, our sample exhibits elements of the signalling effect of education. These results raise important questions in relation to who should provide education and training.