On the one hand, the bulk of human capital accumulated during the Soviet system became obsolete immediately after the start of market reforms; it could not be productively used in new economic conditions. On the other hand, Russia experienced a surge in demand for tertiary education: the number of employees with university and college diplomas increased dramatically over the period. As a result, the situation in modern Russian economy is rather unusual compared to other countries.
This project includes a series of interrelated studies that focus on various issues:
1. Demand and supply of human capital. The aim of this chapter is to investigate whether human capital in the modern Russian economy is adequate for reorientation to an innovative type of development, and whether its quantitative and qualitative characteristics meet the requirements of knowledge-based economy. What is the most probable trajectory of its future evolution? We make several major steps to answer these questions:
- We carry out an analysis of quantitative and qualitative characteristics of human capital of various socio-demographic groups;
- We measure the efficiency of use of human capital;
- We analyze the effectiveness of key mechanisms that facilitate growth of human capital (education, work experience, etc.).
Our main finding is that during the 1990-2000s the growth of demand for a highly skilled workforce outpaced an increase in its supply. This trend largely explains impressive economic attractiveness of education to Russian workers not only in terms of earnings, but also in terms of employment opportunities and the quality of employment.
2. Magnitude and dynamics of returns to education. One chapter employs a meta-analytical approach to measure the returns to education in Russia. This approach is uncommon in papers written by Russian economists. Another chapter looks at the returns to education from a cross-regional perspective. Differences in rewards to human capital across Russian regions are very substantial and highly persistent over time.
3. Relationship between the system of vocational training and country’s labor market model.The main aim of this chapter is to analyze the impact of labor market institutions on the formation of the vocational training system in countries with liberal and coordinated economies. Another important issue is to identify the specific characteristics of these educational systems that can guide the reforms of the Russian system of vocational training.
4. Wage inequality. The purpose of this study is to review the results of previous studies on wage differentials in Russia. The survey covers papers that analyze wage inequality per se as well papers considering specific aspects of inequality (wage differentials by education, occupation, gender, region, sector, ownership type, formal/informal type of labor relations, etc.).
5. Informality in the labor market. We carry out an analysis of the nature of informality in the modern Russia, evaluate the share and dynamics of informal employment, analyze its determinants and consequences in terms of employee welfare and social well-being.
6. The risks of overinvestment/underinvestment in human capital. We analyze discrepancies between actual education level and the level needed at the workplace. These issues become critically important in the situation of continuous growth of demand for higher education in Russia both for individual decision making and for education policy. We investigate the quality of the match between the major “by diploma” and actual occupation of an individual. We provide an estimate of the share of university and college graduates who are employed in occupations different from their fields of study, and analyze the factors that generate these mismatches.Further development of the project focuses on the issues of informality in the labor market. Empirical data were collected in 2010 with a special supplement to the RLMS. These data are used to analyze a wide range of questions that go beyond a mere description of informality in the labor market. More specifically, we plan to study how risk aversion and time preferences are associated with the choice between formal and informal employment and how previous experience of formal or informal employment affects workers’ job-seeking behavior.