Labor Market Outcomes in Transition Countries

Paper Session

Sunday, Jan. 8, 2017 1:00 PM – 3:00 PM

Sheraton Grand Chicago, Michigan AB
Hosted By: Association for Comparative Economic Studies
  • Chair: Richard Pomfret, University of Adelaide

The Consequences of the Unified State Exam

Fabian Slonimczyk
National Research University Higher School of Economics
Marco Francesconi
University of Essex
Anna Yurko
National Research University Higher School of Economics


In 2009, Russia introduced a reform that changed the admissions process in all universities. Before 2009, admission decisions were based on institution-specific entry exams; the reform required universities to determine their decisions on the results of the national high-school test, known as Unified State Exam (USE). One of the main goals of the reform was to make education in top colleges accessible to students from peripheral areas who typically did not enrol in university programs. Using panel data from 1994 to 2014, we evaluate the effect of the USE reform on student mobility. We find the reform led to an increase in mobility rates among high-school graduates from peripheral areas to start college by about 12 percentage points, a three-fold increase with respect to the mobility rate before the reform. This was accompanied by a 40–50% increase in the likelihood of financial transfers from parents to children around the time of the move and a 70% increase in the share of educational expenditures in the last year of the child's high school. We find instead no effect on parental labor supply and divorce.

Poland in an Integrated European Economy: Are Foreign Language Skills Valued by Employers in the Polish Labor Market?

Vera Adamchik
University of Houston-Victoria
Thomas Hyclak
Lehigh University
Piotr Sedlak
Cracow University of Economics


It seems evident that the ability to speak a foreign language would be an economically valuable skill in many labor market situations Previous work has identified a significant positive wage effect for immigrants fluent in the language of their new country, but less attention has been paid to labor market advantages from mastery of a foreign language by workers remaining in their home country. Yet an increasingly integrated global economy would suggest that effective knowledge of English, as the lingua franca of global commerce, would be a valuable skill for those living and working in non-English speaking countries. And for workers in Poland and other new EU members, knowledge of European languages might also be expected to enhance labor market outcomes.
We present an empirical study of the effect of foreign language ability on the base wage of full time workers in Poland in 2014 using a unique data set with survey responses from over 100,000 individuals. Controlling for a large number of worker and firm characteristics we find a statistically significant and quantitatively important effect of self-described language ability on wages. Wage levels are substantially higher for those with advanced or intermediate ability in English. Smaller but still robust positive wage returns are also seen for those with ability in German or French. On the other hand knowledge of Italian, Russian or Spanish has no robust effect on wages. The wage effect is stronger for those in sectors of the economy more closely integrated with international trade and FDI and for workers at higher job levels.

Co-Residence With Elderly Parents and Female Labor Force Participation

Andreas Landmann
University of Mannheim
Helke Seitz
University of Potsdam
Susan Steiner
Leibniz University of Hannover


This paper examines the role of family structure, specifically the co-residence with
parents-in-law, for female labour supply. We apply an instrumental variable approach
to account for the endogeneity of co-residence. We make use of a tradition
in Central Asia, namely that the youngest son of a family with his wife is expected
to live with his parents. Hence, we instrument co-residence with being married to the
youngest son. We use data from Kyrgyzstan and show that co-residence does not seem
to increase female labour supply. This is in contrast to the previous literature, which
has found substantial positive effects.

The Effect of Pension Tax Reductions on Labor Supply

Olga Malkova
University of Kentucky


This study quantifies the effects of Russia’s 1964 and 1970 pension law amendments on old-age labor supply. The amendments gradually reduced the tax rate of employed pensioners from 84 to 50, to 25 and finally to 0 percent. Prior studies have focused on national reforms, on tax reductions smaller in magnitude, and on pension taxes that were actuarially adjusted for the person to receive a higher pension once they stopped working. My contribution is to study a large tax reform that was implemented differentially by region and by pension type. Furthermore, taxes on pensions were not actuarially adjusted which allows me to identify a pure tax effect. The roll-out of the amendments allows me to estimate the effect of reducing pension taxes on labor supply in several ways. First, I exploit that the tax rate was reduced to 25% in some regions and to 50% in others within a differences-in-differences framework. Reducing the pension tax rate from 50 to 25 percent results in a 24 percent increase in old-age employment rates five years after the amendment. Second, I exploit that only old-age pensions were eligible for a tax reduction in a differences-in-differences framework. Reducing the pension tax rates across the country resulted in a 62 percent increase in employment rates five years after the amendment.
Ina Ganguli
University of Massachusetts-Amherst
Tymon Słoczyński
Brandeis University
Louise Grogan
University of Guelph
Hartmut Lehmann
University of Bologna
JEL Classifications
  • J2 - Demand and Supply of Labor