The World Bank Economic Review Advance Access published online on July 19, 2007
The World Bank Economic Review, doi:10.1093/wber/lhm012
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Earnings, Schooling, and Economic Reform: Econometric Evidence From Hungary (1986–2004)
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 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@ers.usda.gov. The authors are affiliated with the Institute for the Study of Labour, Bonn, and the William Davidson Institute at the University of Michigan. The authors are grateful to Tim Barmby, Elizabeth Brainerd, John DiNardo, Peter Dolton, Francisco Ferreira, Randall Filer, Stepán Jurajda, Harmut Lehmann, Jaime de Melo, Branko Milanovic, three anonymous referees, and seminar participants at the Universities of Queen's Belfast, Bristol, and Newcastle; Bank of Finland Institute for Economies in Transition; World Bank Inequality and Pro-Poor Growth Conference; and the Northeast University Development Consortium Conference for valuable comments on previous versions. They also thank János Köllo, Gábor Kezdi, Gábor Kõrösi, and György Lázar for the help with the data, and Dana 
lábková and Ján Plánovsk
for excellent research assistance. The views and opinions expressed in this article do not necessarily reflect the views of the Economic Research Service of the United States Department of Agriculture. Supplemental appendixes to this article are available at http://wber.oxfordjournals.org/. This work benefited from financial support from Phare ACE Grant 97-8085
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.