published in: Economics of Transition, 2007, 15 (1), 33-56
Data from nine transition economies in Central and Eastern Europe are used to examine the
role of computer adoption for returns to education. As in western economies, computers are
adopted most heavily by young, educated, English-speaking workers with the best access to
local telecommunications infrastructures. These same attributes have been associated with
rising relative earnings in transition economies. Controlling for likely simultaneity between
computer use and labor market earnings, we find much larger returns to individuals from
computer adoption than have been found in established market economies. The large returns
are explainable by the high cost of adoption and the scarcity of computer skills. As of 2000,
only 14% had ever tried a computer. Consequently, despite much larger individual returns,
computers are associated with an 8% increase in average incomes in the nine countries.
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