Changing Composition of Human Capital: The Czech Republic, Hungary, and Poland

Abstract

We show that the business education/occupations have expanded and that the technical education/occupations have contracted in the Czech Republic and Poland since 1990. We interpret these changes as an adjustment necessary for their transition to a market economy. We do not find the same pattern in Hungary, which we attribute to its earlier timing of transition. We construct an aggregate model in which labor reallocates in response to changing demand structure. When calibrated to the Czech and Polish data, the model generates a large movement of workers with technical education and experience into business occupations in the early 1990s. The discounted sum of output loss due to the gap between the demand structure and the composition of existing human capital amounts to 20 to 40 percent of 1990 GDP.

Keywords: human capital, composition, occupation, education, mobility, transition

JEL Classification: J31, J62, P23, E13