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The Wage Effects of Schooling under Socialism and in Transition: Evidence from Romania, 1950-2000

We estimate the impact of schooling on monthly earnings from 1950 to 2000 in Romania. Nearly constant at about 3-4 percent during the socialist period, the coefficient on schooling in a conventional earnings regression rises steadily during the 1990s, reaching 8.5 percent by 2000. Our analysis finds little evidence for either the standard explanations of such an increase in the West (labor supply movements, product demand shifts, technical change) or the transition-specific accounts sometimes offered (wage liberalization, border opening, increased quality of education). But we find some support for institutional and organizational explanations, particularly the high productivity of education in restructuring and entrepreneurial activities in a disequilibrium environment.

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Paper provided by W.E. Upjohn Institute for Employment Research in its series Upjohn Working Papers and Journal Articles with number jse20051.

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Handle: RePEc:upj:weupjo:jse20051
Note: Appears in Journal of Comparative Economics 33(2): 300-323
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  1. David Card & John E. DiNardo, 2002. "Skill Biased Technological Change and Rising Wage Inequality: Some Problems and Puzzles," NBER Working Papers 8769, National Bureau of Economic Research, Inc.
  2. 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.
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  21. Kornai, Janos, 1992. "The Socialist System: The Political Economy of Communism," OUP Catalogue, Oxford University Press, number 9780198287766, March.
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  27. Commander, Simon & Köllő, János, 2004. "The Changing Demand for Skills: Evidence from the Transition," IZA Discussion Papers 1073, Institute for the Study of Labor (IZA).
  28. John S. Earle, 1997. "Industrial Decline and Labor Reallocation in Romania," William Davidson Institute Working Papers Series 118, William Davidson Institute at the University of Michigan.
  29. John S. Earle & Almos Telegdy, 1998. "The results of 'mass privatization'in Romania: A first empirical study," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 6(2), pages 313-332, November.
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