This paper aims to analyze the change in return to schooling in Hungary, via comparing communism and market economy periods. As the philosophy of each system is very different, it causes differences in treatment of factors of production as well. While getting familiar with main literature of this topic, it turns out that there is not consensus about the main driving philosophy of communism in terms of organizing production.
Beyond this, my paper can give some insights about efficiency of planned economy and market economy and can serve as a new milestone in long lasting debate between supporters of two systems. As you know, in last century, humanity experienced rivalry of market economy and communism. Superiority of each system was
claimed by their proponents throughout sharp debates, which lasted approximately more than a century. After the collapse of SSSR and its communist block, post communist countries transformed their economic systems to market economy. In today’s world there are still several countries with planned economy, like China with huge economic growth. So, the humanity still has alternative choice in terms of economic systems and “Which one is better? ” is still open question, at least for modern communist economists after the experience of recent economic crises. So, I think my paper can be “fresh” voice in this debate as well.
Table of Contents
1. Literature Review and Motivation
2. Data
3. Empirical framework
4. Results
5. Conclusion
Research Objectives and Themes
This study aims to analyze and quantify the shift in the returns to schooling in Hungary by comparing the communist economic system with the post-transition market economy, using individual-level wage data to test if the market economy provides higher rewards for educational attainment.
- Comparison of economic systems regarding human capital valuation
- Empirical analysis of returns to education in Hungary (1986 vs. 2004)
- Assessment of the impact of transition on the value of work experience
- Utilization of Mincerian earnings equations with industrial and regional controls
Excerpt from the Book
Literature Review and Motivation
This paper aims to analyze the change in return to schooling in Hungary, via comparing communism and market economy periods. As the philosophy of each system is very different, it causes differences in treatment of factors of production as well. While getting familiar with main literature of this topic, it turns out that there is not consensus about the main driving philosophy of communism in terms of organizing production. There are some contradictory assumptions on rewarding factors of production, especially personal characteristics under planned economy. According to one them, because of egalitarian approach towards workers, wage profiles were compressed and planners set wages on the base of industry and work profile under communism (Campos and Joliffe, (2003)). So personal characteristics like education were not evaluated and that is why after transition to market economy in ex-communist countries return to education should increase. But other assumption states that planners were well informed about the importance of personal traits in productivity and they kept total wage fund for a firm fixed, while allowing managers to distribute available money within firm according to performance and personal properties (Robert Chase, (1998)). Wage grid was one of the ways, to evaluate education. So, this assumption concludes that, after transition education didn’t yield more return than it was previously. But, as Bergson (1944) argued, managers had to follow ceilings and floors, so under planned economy return to education was lower than it should be and after transition return should increase. Also, according to Schultz(1975) a more educated person is more successful in adjustment to disequilibrium, which means in new system, more educated people would achieve better job and would get more for their education, than it was in previous system. In summary of above discussion, we can conclude that, although some assumptions claim possible decrease in return to schooling in former communist countries after transition to market economy, mainstream literature support first stated approach –increase in return to education in market economy.
Summary of Chapters
Literature Review and Motivation: This chapter reviews theoretical debates regarding how different economic systems value personal characteristics and education, setting the stage for empirical analysis.
Data: This section describes the individual-level datasets utilized, covering the communist era (1986) and the transition period (2004), and explains the coding of variables like education and industry.
Empirical framework: This chapter details the methodology based on Mincerian earnings equations, including the use of OLS regression and control variables for self-selection bias.
Results: This section presents the quantitative findings, showing a significant increase in the returns to education following the transition to a market economy.
Conclusion: This final chapter synthesizes the results, confirming a higher reward for education in the market economy while acknowledging potential biases in the empirical model.
Keywords
Hungary, Communism, Market Economy, Returns to Schooling, Human Capital, Wage Survey, Mincer Equation, Economic Transition, Labor Economics, Educational Attainment, Wage Profiles, Empirical Analysis
Frequently Asked Questions
What is the fundamental focus of this research paper?
The paper examines how the transition from a communist economic system to a market economy in Hungary influenced the financial returns associated with individual education levels.
What are the primary themes discussed in the work?
The core themes include the comparative efficiency of planned versus market economies, the valuation of human capital, and the shift in economic incentives for workers during political and systemic transition.
What is the central research question?
The study seeks to determine whether a market economy systematically rewards education more effectively than the preceding communist system.
Which scientific methodology is applied?
The author uses Mincerian earnings equations—specifically OLS regression analysis—to process individual-level wage data from 1986 and 2004, controlling for industry, region, and experience.
What content is addressed in the main body?
The main body covers a literature review of systemic economic philosophies, a detailed explanation of the datasets and variable coding, the setup of empirical models, and the presentation of regression results.
Which keywords characterize this study?
Key terms include Hungary, Communism, Market Economy, Returns to Schooling, Human Capital, Mincer Equation, and Economic Transition.
Why was Hungary specifically selected for this case study?
Hungary was chosen because it achieved the highest score in the EBRD index of market-supporting institutions in 2001 among post-communist countries, making it an ideal candidate for natural experimentation.
How does the author explain the decline in the value of experience?
The author argues that experience gained during the communist era became less relevant or obsolete in a market economy due to significant changes in technology and the importance of market-oriented skills like marketing and competition strategy.
What are the limitations of the empirical model?
The author notes potential bias due to measurement errors, self-selection, and the omission of "ability" as a control variable, which could influence the precision of the estimated returns.
- Arbeit zitieren
- Samir Huseynov (Autor:in), 2009, One more efficiency test for market economy-Return to Schooling, München, GRIN Verlag, https://www.grin.com/document/188822
