Estimating the Returns to University Majors in the Post-Soviet Russian Federation (2013)

Undergraduate: Kelly Blessing

Faculty Advisor: Klara Peter
Department: Economics

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As the structure of an economy changes, so do the needs of the labor market. Over the past twenty years as Russia has moved from a communist government to a market economy based on the laws of supply and demand, the demands of the labor market have altered radically. This has had spillover effects into the market for college majors, with technical majors declining in popularity and non-technical, business-focused majors rising rapidly. The question then becomes, how are different university degrees valued in the labor market? That is, what are the relative wage premia of some university majors compared to others? This research finds that as the composition of technical majors declined in the market economy, their relative wage premium rose. Conversely, as the composition of non-technical business majors rose, at first in the early market economy, they enjoyed a relative wage premium due to the scarcity of majors, but as an oversupply of majors flooded the market, these returns have decreased in the later market era. The research divides the sample into the old cohort, educated in the Soviet era, and the new cohort, educated post-liberalization. In this way, both year and birth cohort effects on wages are captured in the estimation.