Education and the Adjustment of the Albanian Labour Market during Transition

Despite the future benefits from investment in education predicted by theory, Albanian participation rates upper secondary schooling have fallen since 1990. This reduction in post-compulsory schooling seems to be unique amongst transition economies. The theoretical framework developed in this thesis suggests this is the consequence of a high unemployment/low skill/bad job equilibrium. We argue a major cause of this situation is the large agricultural sector in the Albanian economy. We provide insights into the causes of the previously neglegted 'bad' equilibrium from an empirical analysis of the returns to education, using OLS and Logit/Probit estimation techniques. The theoretical platform supports the disjunctions between sectors in the labour market related to urban and rural localities. Wage returns to post-compulsory secondary education are low or not significantly different from zero in rural areas (for males). The earnings premia for tertiary education are generally higher and in urban areas comparable to those found in other transition economies. The key determinants of participation in post-compulsory are largely found to reflect intergenerational transmission mechanisms, with parental education being an important determinant. A large family, high local unemployment and greater inequality of income in the area of residence all reduce the . likelihood of attending upper secondary schooling. While the young adjust their labour market expectations through their schooling decisions interactively, another dimension of the labour market adjustment relates to migration decisions. We estimate the impact that emigration has had in alleviating unemployment in Albania. Drawing on these findings, our analysis concludes with the development of policy recommendations to target the movement towards lower unemployment and a higher proportion of high skill/good jobs in the Albanian labour market.EThOS - Electronic Theses Online ServiceGBUnited Kingdo