P20 - Socialist Systems and Transitional Economies: GeneralReturn

In the 1990s, the transition countries in Central and Eastern Europe witnessed an upward trend in returns to education, unlike in Western European countries. This upward trend led to much higher returns than in what was observed in the communist period or compared to the West. The surveys EU-SILC collected since 2005 show that although returns to tertiary education were converging across Europe, there is still a big difference between East and West, with returns considerably higher in the East. Panel analysis reveals also substantial differences in the factors behind returns to tertiary education in the East and the West. The assumed negative relationship between the share of tertiary-educated workers in the working-age population and the returns to tertiary education were confirmed only in the West. The job vacancy rate has a significant negative impact on returns to tertiary education only in the East. While in the West the labour market seems to react more to labour supply, in the East labour demand plays a more important role.

This paper discusses the electoral implications of psychological motivation on voting functions. We tested a claim of the Weber-Fechner law as applied to electoral behaviour - specifically, that an expanded public sector leads politicians to make more significant, opportunistic distortions of public expenditures than the distortions observed when the public sector is diminished. We employed a system of simultaneous equations to test this hypothesis for cases observed in more than sixty democracies since 1960. We gave a special focus to the cases of Central and Eastern European countries. Our results confirm the main implications of the Weber-Fechner law. Years in incumbency, running for re-election, higher unemployment and higher inflation rates tend to generate negative moods, feelings and affects in the electorate; thus, these factors tend to approximate the vote share of the most voted party to the remaining vote share of the challenger political forces.