The Returns from Higher Education in Russia: Public vs. Private Sector

A significant part of graduates of specialties that involve work in the public sector, as a result, after graduating from a university and entering the labor market, make a choice in favor of the private sector. The public sector, in its turn, performs a number of important functions to overcome the inefficiency of the private sector, but it does not receive qualified specialists. What is the total cross-sectoral wage gap, and what other factors might determine this gap – this is the question we intend to answer. The novelty of the work lies in the fact that we will consider data on graduates who have just entered the labor market, often without work experience. Thus, the choice in which sector they are going to work is one of the key decisions on their path in life, since it sets a benchmark for further development. This work has the following structure. The first part provides a literature review: it examines in detail market failures and the role of the public sector in their settlement, provides an overview of the theory of human capital, signal theory, the theory of segmented markets and the theory of compensating differences, consideration of the mechanisms of wage compilation in different sectors, analysis of foreign experience of the functioning of public sector and structure of remuneration of employees of budgetary organizations. Relevant hypotheses are put forward on the basis of a literature review. The second chapter presents the results of an empirical study consisting of an analysis of previously identified hypotheses by using the SPSS software to verify the data provided by the All-Russian Research of students. As a result, the author of this work aims to study the degree of influence of various factors on the difference in returns to higher education for individuals involved in different sectors of the economy, and to provide recommendations on what actions can be taken by the state to reduce the intersectoral gap and attract economic agents from higher education to work in the public sector.