Clark, Andrew E. (1999). Human capital investment in a transition economy: the rate of return and signalling effects in the Russian labour market.
The transition to a market based economy in Russia has led to the reassessment of the method and direction of education and training. This paper focuses on the reasons why and purpose behind undertaking not only higher education, but also completing specific levels of education. It examines whether, in post-transition Russia, education enhances income streams as a return for increased productivity through personal human capital investment or whether education is simply working as a screening device for potential employers to obtain highly productive workers. Using data drawn from the Russian Longitudinal Monitoring Survey (RLMS) this paper assesses the extent and implications of returns to education in Russia. The RLMS is divided into two phases, phase I collected data between 1992-1993 and phase II collected data between 1994-1996. The main purpose of the survey was to develop a sample of households and individuals to enable a systematic analysis of the reform process, covering over 500 variables including income and expenditures, employment details, education levels and health details. The second half of the paper focuses on signalling. Signalling models assume that in addition to productivity enhancement, education may be undertaken by those with higher innate ability, in order to signal to their employability to prospective employers. Three signalling models - the Psacharopoulos (1979) model, the Wolpin (1977) model and the Liu ad Wong (1982) model are used in this analysis. A number of tables are included in support of the text.
Clark, Andrew E.