Heritage from Czar: The Russian Dual System of Schooling and Signaling
Employers use educational background as a signal of a worker fs latent ability. This signaling effect decreases as employers learn about the worker fs ability with his/her work experience, which results in negative coefficient of interaction term between schooling and experience in wage equation. Meanwhile, if schooling and experience are complements, it works to make the coefficient positive. We show the latter complementarity effect dominates for vocational school graduates school in Russia. Given that European vocational school systems were introduced from the Russian Empire, our results at least partly explain why employer learning is only weakly observed in Europe.
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