Human Capital Externalities: Evidence from the Transition Economy of Russia

Alexander Muravyev
Authors registered in the RePEc Author Service: Александр Муравьев

No 629, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: The paper tests for the existence of human capital externalities, more precisely those stemming from higher education, using a micro-level approach: the Mincerian wage regression augmented with the average level of education in a local geographical area (city). To solve identification problems arising due to endogeneity of average education the study exploits a natural experiment provided by the process of economic transition in the former communist economies. We argue that the educational structure of cities under the central planning was determined by the government rather than the market; thus the average educational attainment in cities at the end of communism can be regarded as exogenous with respect to the wages prevailing after the start of transition. The identification strategy based on the use of the pre-transition average education is applied to data from the Russia Longitudinal Monitoring Survey, RLMS. Empirical results are consistent with the presence of significant human capital (educational) externalities in the Russian economy. According to the estimates, one percent increase in the college share in a city results in the increase of city residents' wages by about 1.5 percent. The result proves to be robust to several changes in the empirical specification.

Keywords: Human Capital Externalities; Cities; Russia (search for similar items in EconPapers)
JEL-codes: I2 J31 (search for similar items in EconPapers)
Pages: 35 p.
Date: 2006
New Economics Papers: this item is included in nep-cis, nep-edu, nep-hrm, nep-tra and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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