Earnings, Schooling and Economic Reform: Econometric Evidence from Hungary (1986-2004)

with Dean Jolliffe

Published in World Bank Economic Review 21(3): 509-526, December 2007          ( PDF )

How does the relationship between earnings and schooling change with the onset of comprehensive
economic reform? This paper uses a unique data set and a novel procedure to assess sample selection bias
(based on DiNardo, Fortin and Lemieux’s) to shed light on this question. Using data for almost 4 million
Hungarian wage earners, we find that returns to skill increased by 75 percent from 1986 to 2004 (that is,
in the period stretching from communism to full membership in the European Union). Reform winners were
the college and university educated and those employed in the services sectors. Reform losers seem to be
those in construction and agriculture.

Working paper version           CEPR DP

Great stuff             Link to Hungarian Labour Market Yearbooks
                               (a really great service from the Institute of Economics/HAS)


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