Returns to the Market: Valuing Human Capital in the Post-Transition Czech and Slovak Republics
Posted: 6 Feb 2000
Date Written: March 1999
An employer-based sample of over between 200,000 and 300,000 Czech and 50,000 to 100,000 Slovak workers is used to estimate returns to various forms of human capital between 1995 and 1997 (to be extended to 1998). By 1997 education of all types had become substantially more highly rewarded in both countries than it was either under communism or in the early years of the transition. By 1997 returns to education were approximately equal to those in other OECD countries. Increases in the value of education were especially pronounced for types of education ideologically disfavored by communism and younger workers but were approximately equal for men and women. Returns to experience (age) increases slightly in Slovakia and remained unchanged in the Czech Republic, suggesting that human capital acquired at work under communism was not significantly devalued by the shift to a market economy. Both the variance of log wages and the unexplained residual in a wage equation increased substantially, suggesting that returns to unmeasured forms of human capital also increased. The evidence is that restructuring of wages followed a well defined sequence, beginning with private firms in the low-unemployment Czech Republic, extending to state sector workers in the Czech Republic and employees of private firms in Slovakia next, and reaching state sector workers in Slovakia last, if at all.
JEL Classification: J24
Suggested Citation: Suggested Citation