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Skill-Biased Transition: The Role of Markets, Institutions, and Technological Change

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  • Klara Sabirianova Peter

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Abstract

This study attempts to explain why the transition to a market economy is skill-biased. It shows unequivocal evidence on increased skill wage premium and supply of skills in transition economies. It examines whether similar skill???favoring shifts in the Russian and U.S. economies are driven by the same set of factors. Our analysis elaborates on the model of alternative theories of the increased wage skill premium and then evaluates three main hypotheses: skillbiased technological change, the market adjustment hypothesis, and the institutional factor hypothesis. To test these hypotheses, the study uses unique linked employer-employee data that spans the 16 years of the Soviet and transition periods in Russia (1985-2000), with a special emphasis on data quality, measurement errors, and retrospective biases. The main conclusion is that there is no uni-causal and time-invariant explanation for skill-biased changes in wages and employment in the Russian economy. The increased skill wage premium has been driven mainly by institutional factors during the early period and by productivity and technological change during the late transition period, and reinforced by market adjustment of wage ratio to the true differences in labor productivity.

Suggested Citation

  • 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.
  • Handle: RePEc:wdi:papers:2003-616
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    File URL: http://deepblue.lib.umich.edu/bitstream/2027.42/40002/3/wp616.pdf
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    Cited by:

    1. Stepán Jurajda & Katherine Terrell, 2009. "Regional unemployment and human capital in transition economies," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 17(2), pages 241-274, April.
    2. Rutkowski, Jan, 2006. "Labor market developments during economic transition," Policy Research Working Paper Series 3894, The World Bank.
    3. Andren, Daniela & Earle, John S. & Sapatoru, Dana, 2005. "The wage effects of schooling under socialism and in transition: Evidence from Romania, 1950-2000," Journal of Comparative Economics, Elsevier, vol. 33(2), pages 300-323, June.
    4. 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.
    5. Aleksandra Parteka, 2012. "Skilled-Unskilled Wage Gap Versus Evolving Trade And Labour Market Structures in the EU," Working Papers 1204, Instytut Rozwoju, Institute for Development.
    6. Gorodnichenko, Yuriy & Sabirianova Peter, Klara, 2005. "Returns to schooling in Russia and Ukraine: A semiparametric approach to cross-country comparative analysis," Journal of Comparative Economics, Elsevier, vol. 33(2), pages 324-350, June.
    7. Gimpelson, Vladimir & Kapeliushnikov, Rostislav, 2016. "Polarization or upgrading? Evolution of employment in transitional Russia," Russian Journal of Economics, Elsevier, vol. 2(2), pages 192-218.
    8. Lukiyanova, A., 2011. "Wage Inequality in Russian Economic Transition (1991–2008): Stylized Facts and Explanations," Journal of the New Economic Association, New Economic Association, issue 12, pages 124-147.
    9. Denisova, Irina & Kartseva, Marina, 2007. "A Premium for a Degree in Engineering: An Estimation of Returns to the Field-Specific Education in Russia," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 5(1), pages 30-57.
    10. Berger, Mark C. & Blomquist, Glenn C. & Sabirianova Peter, Klara, 2008. "Compensating differentials in emerging labor and housing markets: Estimates of quality of life in Russian cities," Journal of Urban Economics, Elsevier, vol. 63(1), pages 25-55, January.

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    Keywords

    technological change; wage inequality; human capital; transition; Russia; linked employer-employee data;

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