Lost in transition? The returns to education acquired under communism in the first decade of the new millennium

Using data for Germany and 23 other economies in Eastern and Western Europe, this paper estimates the monetary returns to education acquired under communism more than 10 years after the fall of the Berlin Wall. We show that, in the 2000s, Eastern European workers who completed their education under communism earned in the 2000s similar returns to their education as did workers belonging to the same age cohorts who studied in Western Europe. This might suggest that education under communism is still as valuable as education attained in Western Europe. However, individuals educated under communism are more likely than their Western counterparts to be unemployed, retired or disabled, and therefore to earn lower or zero returns to their education. Moreover, when we allow the returns to pre- and post-secondary education to differ, we find that senior males who have attained only primary or secondary education under communism are penalized in the post-transition Eastern European labour markets, and that those who have completed post-secondary education under communism enjoy in these markets higher payoffs to their education than similarly educated Western European individuals who are employed in the West.