Does knowing foreign language pay off in the Russian labor market?

Abstract

Though foreign language is widely accepted as an important form of human capital and a factor of economic growth, the labor market outcomes for foreign language skills in developing economies remain understudied. This research explores the returns to different levels of foreign language skills in the Russian labor market and tries do disentangle the differences in return associated with job characteristics. The results indicate positive wage premium for foreign language skills in Russia which approximately equals to 9% when controlling for job-related characteristics. Moreover, wage premium for advanced level of knowledge reaches 24%. However, there is considerable heterogeneity in the economic returns across age groups, levels of education, and occupations. The highest return to foreign language skills is obtained by managers and results to be 13%. For elementary occupations the estimate appears to be insignificant which proves that return to foreign language skills exists only for a limited number of specific jobs.