Relative living standards in new market economies: Evidence from Central Asian household surveys

Abstract

We examine household data from the Central Asian successor states to the Soviet Union to analyze how living standards are determined in newly established market economies. Three variables, namely location, children, and university education, are consistently significant across all four countries studied and play the largest role in determining household expenditure. The first two are of special significance to Central Asia, with its relative economic backwardness and high birth rate, but the importance of high-level general-purpose education appears to be a ubiquitous but underappreciated factor. Higher returns to education were expected in a market economy, but few observers distinguish between types of education; in the shift from central planning people with high-level general-purpose education have been best able to take advantage of new opportunities, while narrower technical education, by contrast, has left many with obsolete skills yielding zero returns in the market.