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The World Bank Economic Review Advance Access originally published online on July 19, 2007
The World Bank Economic Review 2007 21(3):509-526; doi:10.1093/wber/lhm012
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© The Author 2007. Published by Oxford University Press on behalf of the International Bank for Reconstruction and Development / THE WORLD BANK. All rights reserved. For permissions, please e-mail: journals.permissions@oxfordjournals.org

Earnings, Schooling, and Economic Reform: Econometric Evidence From Hungary (1986–2004)

Nauro Campos

Nauro Campos (corresponding author) is a professor of economics at Brunel University, London, and a research affiliate at the Centre for Economic Policy Research, London; his e-mail address is nauro.campos{at}brunel.ac.uk

Dean Jolliffe

Dean Jolliffe is an economist with the Economic Research Service, United States Department of Agriculture, and a research affiliate with the National Policy Center at the University of Michigan; his e-mail address is jolliffe{at}ers.usda.gov

JEL codes: I20, J20, J24, J31, O15, O52, P20

How does the relationship between earnings and schooling change with the introduction of comprehensive economic reform? This article sheds light on this question using a unique data set and procedure to reduce sample-selection bias. The evidence is from consistently coded, nonretrospective data for about 4 million Hungarian wage earners. Returns to skill increased 75 percent from 1986 to 2004 (that is, during the period stretching from communism to full membership in the European Union). The winners were those with a college or university education and those employed in the services sector (which here excludes those in public services). The reform losers were those in construction and agriculture, those with only a primary or vocational education (who experienced a decline in returns to their education), and younger workers who acquired most of their education after the main reforms were in place.


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