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Returns to basic skills in Central and Eastern Europe - a semi-parametric approach

  • Kevin Denny

    (University College Dublin)

  • Patrick Orla Doyle

    (University College Dublin)

This paper uses semi-parametric econometric techniques to investigate the relationship between basic skills and earning in three post-communist countries - the Czech Republic, Hungary and Slovenia using the IALS dataset. While the large increases in the returns to education in the new market economies has been well documented in the literature, no study to date has examined the impact of basic skills and schooling on income. Estimating a Mincer human capital model we find that including a measure of basic skills reduces the returns to education. In addition, using a partial linear model in which log earnings is linear in schooling, but is an arbitrary function of basic skills, we find that this relationship is not well described by the common assumption of linearity at the tails of the distribution.

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File URL: http://www.ucd.ie/economics/research/papers/2005/WP05.07.pdf
File Function: First version, 2005
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Paper provided by School of Economics, University College Dublin in its series Working Papers with number 200507.

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Length: 18 pages
Date of creation: 06 Apr 2005
Date of revision:
Handle: RePEc:ucn:wpaper:200507
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Web page: http://www.ucd.ie/economics

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  1. John Micklewright & John Flemming, 1999. "Income Distribution, Economic Systems and Transition," Papers iopeps99/69, Innocenti Occasional Papers, Economic Policy Series.
  2. Elizabeth Cascio & Ethan Lewis, 2005. "Schooling and the AFQT: evidence from school entry laws," Working Papers 05-1, Federal Reserve Bank of Philadelphia.
  3. Doyle, Orla & Fidrmuc, Jan, 2004. "Who is in favor of enlargement? Determinants of support for EU membership in the candidate countries' referenda," ZEI Working Papers B 04-2004, ZEI - Center for European Integration Studies, University of Bonn.
  4. Stanovnik, Tine, 1997. "The returns to education in Slovenia," Economics of Education Review, Elsevier, vol. 16(4), pages 443-449, October.
  5. Steven McIntosh & Anna Vignoles, 2000. "Measuring and Assessing the Impact of Basic Skills on Labour Market Outcomes," CEE Discussion Papers 0003, Centre for the Economics of Education, LSE.
  6. Robert S. Chase, 1997. "Markets for Communist Human Capital: Returns to Education and Experience in the Czech Republic and Slovakia," Working Papers 770, Economic Growth Center, Yale University.
  7. Hansen, Karsten T. & Heckman, James J. & Mullen, Kathleen, 2003. "The Effect of Schooling and Ability on Achievement Test Scores," IZA Discussion Papers 826, Institute for the Study of Labor (IZA).
  8. Filer, Randall K. & Jurajda, Stepan & Planovsky, Jan, 1999. "Education and wages in the Czech and Slovak Republics during transition," Labour Economics, Elsevier, vol. 6(4), pages 581-593, November.
  9. Kevin J Denny & Colm P Harmon & Vincent O’Sullivan, 2003. "Functional Literacy, Educational Attainment and Earnings - A Multi-Country Comparison," Working Papers 200319, School of Economics, University College Dublin.
  10. Campos, Nauro F. & Jolliffe, Dean, 2003. "After, before and during: returns to education in Hungary (1986-1998)," Economic Systems, Elsevier, vol. 27(4), pages 377-390, December.
  11. Andrew Newell & Barry Reilly, 1999. "Rates of Return to Educational Qualifications in the Transitional Economies," Education Economics, Taylor & Francis Journals, vol. 7(1), pages 67-84.
  12. Fleisher, Belton M. & Sabirianova, Klara & Wang, Xiaojun, 2005. "Returns to skills and the speed of reforms: Evidence from Central and Eastern Europe, China, and Russia," Journal of Comparative Economics, Elsevier, vol. 33(2), pages 351-370, June.
  13. 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.
  14. Daniela Andren & John S. Earle & Dana Sapatoru, 2004. "The Wage Effects of Schooling under Socialism and in Transition: Evidence from Romania, 1950-2000," Upjohn Working Papers and Journal Articles 04-108, W.E. Upjohn Institute for Employment Research.
  15. Flanagan, Robert J., 1998. "Were communists good human capitalists? The case of the Czech Republic," Labour Economics, Elsevier, vol. 5(3), pages 295-312, September.
  16. Gorodnichenko, Yuriy & Peter, Klara Sabirianova, 2004. "Returns to Schooling in Russia and Ukraine: A Semiparametric Approach to Cross-Country Comparative Analysis," IZA Discussion Papers 1325, Institute for the Study of Labor (IZA).
  17. Denny, K.J. & Harmon, C.P., 1999. "Testing for Sheepskin Effects in Earnings Equations: Evidence for Five Countries," Papers 99/21, College Dublin, Department of Political Economy-.
  18. Katherine A. Magnuson & Christopher J. Ruhm & Jane Waldfogel, 2004. "Does Prekindergarten Improve School Preparation and Performance?," NBER Working Papers 10452, National Bureau of Economic Research, Inc.
  19. Tobias, J.L., 2000. "Are Return to Schooling Concentrated Among the Most Able? A Semiparametric Analysis of the Ability-Earnings Relationship," Papers 00-01-12, California Irvine - School of Social Sciences.
  20. Viliam Druska & Byeong ju Jeong & Michal Kejak & Viatcheslav Vinogradov, 2002. "Assessing the Problem of Human Capital Mismatch in Transition Economies," William Davidson Institute Working Papers Series 467, William Davidson Institute at the University of Michigan.
  21. Green, David A. & Craig Riddell, W., 2003. "Literacy and earnings: an investigation of the interaction of cognitive and unobserved skills in earnings generation," Labour Economics, Elsevier, vol. 10(2), pages 165-184, April.
  22. Robert S. Chase, 1997. "Markets for Communist Human Capital: Returns to Education and Experience in the Czech Republic and Slovakia," William Davidson Institute Working Papers Series 109, William Davidson Institute at the University of Michigan.
  23. Schultz, Theodore W, 1975. "The Value of the Ability to Deal with Disequilibria," Journal of Economic Literature, American Economic Association, vol. 13(3), pages 827-46, September.
  24. Chase, R.S., 1997. "Markets for Communist Human Capital: Returns to Education and Experience in the Czech Republic and Slovakia," Papers 770, Yale - Economic Growth Center.
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