DP4716 Earnings, Schooling and Economic Reform: New Econometric Evidence

Author(s): Nauro F. Campos , Dean Jolliffe

Publication Date: October 2004

Keyword(s): human capital , transition economics , economic reform

JEL(s): I20 , J20 , J24 , J31 , O15 , O52 , P20

Programme Areas: Institutions and Economic Performance , Labour Economics

Link to this Page: www.cepr.org/pubs/dps/DP4716.asp

How does the relationship between earnings and schooling change with the introduction of comprehensive economic reform? This Paper uses a unique dataset (covering about 3 million Hungarian wage earners, from 1986 to 1998) and a novel procedure to correct sample selection bias (based on DiNardo, Fortin and Lemieux’s) to shed light on this question. We find that reform was successful in general, increasing returns to skill by 70.5%, but that there were winners and losers. The winners seem to be the college and university educated, those employed by the smaller firms and those in commerce and services. The losers are those in manufacturing and agriculture and, surprisingly, those who received their formal education after the initiation of reform.