Evolution of private returns to schooling over the business cycle in a transition economy

Purpose: The purpose of this study is to provide the estimates of returns to schooling using consistent methodology and comparable set of data for a long time horizon for a country undergoing economic transition. Second, the paper aims to verify if returns to schooling in Poland were pro-cyclical or counter-cyclical. Design/methodology/approach: The paper is based on the human capital theory in estimating the wage returns to years of schooling controlling additionally for unemployment rates at a regional level. Data come from a collection of Polish individual LFS waves for the period 1995–2017. Findings: Returns to schooling in Poland were increasing until 2006 and declining afterwards unveiling the supply side effects domination. The estimates suggested counter-cyclicality of returns in Poland. Research limitations/implications: Using LFS data made it impossible to control for ability bias therefore it is possible that the estimates are somewhat biased (the literature however suggests that the extent of the bias is likely to be small). It might still be argued that using consistent methodology for the whole period of analysis still offers valuable insight into returns evolution. Originality/value: This paper finds a reversal of returns trend after 2006 suggesting the period after accession to EU exhibited a supply side effect domination. The findings on counter-cyclicality of returns to education in Poland have not yet been documented in the literature.