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Working paper

The Determinants of Expected Returns on Higher Education in Russia: A Human Capital Theory Perspective

This paper evaluates the determinants of the expected returns on higher education among students of Russian universities accounting for the variation of the socio-economic development of Russian regions. Based on the longitudinal study, ‘Trajectories in Education and Careers’, it is shown that the average salary in a region is positively related to the individual estimates of expected salary after graduation, but does not affect the relative returns on higher education, i.e. the expected percentage increase in wages, compared to the salary in the absence of a higher education degree. In general, the results correspond to human capital theory, and confirm the rationality of students’ salary expectations. The expected salary shortly after graduation from university is positively related to the academic achievement expressed in the university entrance exam (the Unified State Exam, USE), full-time study and prior work experience. Male students expect to receive higher salaries compared to female students. Students who study for free, expect lower salaries compared to those students who cover their tuition costs. An indirect influence (through USE results) of school characteristics and parental education on expected salary was found. In addition, we discovered a direct and indirect relationship between family income and expected salaries after university graduation.