Returns to education in four transition countries

Abstract

Interest in transition countries has increased since the beginning of reforms from planned to market economy, but there are still important limitations to the research undertaken on the returns to education in post-communist countries. A common perception of transition economies is that the return to schooling improves as economic reform progresses. This chapter uses quantile regression techniques to analyse heterogeneous patterns of returns to education across the conditional wage distribution in four transition economies – Bulgaria, Serbia, Tajikistan, and Russia. The chapter investigates two of the main issues associated with estimating the return to education – sample selection and endogeneity. The analysis finds that returns to education vary across the earnings distribution, and the results also vary across the four countries examined. In addition to the explanations around the relationship between education and ability, there are some country-specific reasons that may drive the results found in the chapter.