A Study about Private Returns to Human Capital over Transition: Belarus
Abstract: The gradualist approach to economic transition in Belarus would contribute to form the a priori expectation that the rate of return to education is low and the earnings profile by work experience flat, like they supposedly were under central-planning. However, the first available estimates of Mincerian earnings equations based on the Belarusian Household Survey on Incomes and Expenditure suggest that the skill payoff was high in 1996, at about 10.1% per year, and stable. The return to one year of work experience is also high at 5%. This result maintains also after controlling for sample selection bias, despite a general reduction in the annual rate of return to education by about 20-30%.
Introduction: This research work provides the first available evidence on the returns to education in Belarus. Belarus is an interesting case study for the specific transition path followed. After a period of fast reforms in the early 1990s, which led to price (but not wage) liberalisation, Belarus has been, perhaps, the least reformed of the transition economies in Eastern Europe and in the CIS. In fact, though being the target of recent interventions, which led price growth to go down from three to two digits, macroeconomic stabilisation is still far from being achieved. Privatisation is progressing very slowly. Trade liberalisation is not implemented yet and the State exerts a strict control on the labour market. This situation provides a unique testing ground of many hypotheses developed in the economic transition literature about the size of the increase in the returns to education, and about the determinants of such an increase. Keep reading…
