A university degree as a signal of individual productivity has been associated with a significant wage premium in both developed and developing countries. However, the rapid massification of higher education at the end of the 20th and the beginning of the 21st century has inevitably turned the most common Bachelor’s degree into a weak labour market signal, no longer serving as a guarantee of successful employment. Along with the massification of undergraduate education and technological change, leading to gradual job polarization, the role of more advanced degrees has also grown. The Master’s degree, which can be seen as a certificate of specialised training, providing field-specific professional and instrumental skills, has become a way of distinguishing oneself from other jobseekers and adapting to innovations. 

Despite its recent rise in popularity, post-baccalaureate education has received relatively little attention from researchers, especially when compared to the extensive literature on returns to undergraduate degrees. The main reason is limited data that would contain information on Master’s degree holders. Much of the existing research is focused on graduates from the early 1990s (Song, Orazem, & Wohlgemuth, 2008; Stevenson, 2016; Titus, 2007), which offers valuable insights from a research perspective but may not fully represent the current economic landscape. More recent and comprehensive data would make it easier to identify relevant trends in returns to human capital in general and advanced degrees in particular. Previous studies have demonstrated that the Master’s degree is predominantly associated with positive wage returns (Arcidiacono, Cooley, & Hussey, 2008, Gandara & Toutkoushian, 2017, Grove & Hussey, 2011, Jaeger & Page, 1996). However, the existing evidence is largely limited to the US and the UK, with only a few examples from European countries or Asia.

This study estimates the early career wage returns, associated with obtaining a Master’s degree, using all-country administrative data for Russia with a wide set of educational and job characteristics for recent graduates. In 2003, Russia joined the Bologna process, which initiated a long period of transformation of the country’s higher education system. By 2011, the “4+2” system, which corresponds to the duration of Bachelor’s and Master’s programmes, had been implemented. Master’s programmes have rapidly grown in popularity among applicants, despite the short time since the two-tier higher education system was approved. Over the 10 years from 2013 to 2023, despite a 38 per cent decrease in the total output of higher education (from 1,291 to 805.9 thousand people per year), the number of Master’s graduates almost tripled from 56.5 thousand people in 2013 (4 per cent of the total output of higher education programmes) to 158.3 thousand in 2023 (or 20 per cent of the total output). Although the interaction between higher education and the labour market in Russia is well studied, previous evidence on the returns to a Master’s degree is scarce and none of the previous studies accounted for unobserved abilities and previous educational choices.

Our contribution to the literature is twofold. First, we add to the growing body of research estimating the returns to advanced degrees. Second, we complement existing research by focusing on recent Master’s graduates who entered postgraduate education directly from first-cycle programmes. Unlike in the US, where most Master’s students enter postgraduate programmes with at least several years of work experience, in Russia (similar to some European countries such as Italy or Poland) most Master’s students have recently completed their undergraduate studies and only begin their careers. 

The main problem that arises in the study of returns to education is endogeneity. On the one hand, endogeneity arises from the failure to account for a graduate's prior educational attainment before entering graduate school. The assumption that only the highest level of education matters for outcomes significantly biases the estimates (Altonji, 1993), resulting in an overestimation of the returns to master's degrees in fields that already attract high-paying undergraduate majors (e.g. computer science) and an underestimation of the returns to lower-paying majors (e.g. humanities, social work). On the other hand, as in most studies of returns to education, endogeneity may be due to non-random selection of students by ability or to reverse causality, with higher wages leading to a greater likelihood of enrolment in master's programmes. In this study, we use novel, rich administrative data that combine education records with social insurance records for all university graduates in Russia from 2016 to 2023. The data come from the "Monitoring of Graduate Employment", which is conducted by the Ministry of Labour and Social Security of the Russian Federation together with the Federal Service for Labour and Employment. The information includes level of education, field of study, name of institution, academic achievement, and monthly employment data, including wage, company size, region of work, occupational group and industry. The dataset currently allows us to construct a unified educational trajectory from school to postgraduate studies and to track early career outcomes. To address the issue of endogeneity and non-random selection in postgraduate studies, we apply fixed-effects modelling techniques as well as entropy balancing, which is a reweighting method used in causal inference to create balanced samples based on covariates. The main goal is to construct a counterfactual control group by matching graduates who obtained a Master's degree with graduates who are as similar as possible on a set of pretreatment characteristics but who did not enter a Master's programme (Hainmueller & Xu, 2013). The method adjusts the weights of units in the sample so that the reweighted distribution of covariates in the treatment group resembles the distribution in the control group. We include school and undergraduate degree characteristics that precede enrolment in a master's programme as a basis for entropy adjustment.

The paper provides estimates of the labour market returns to Master’s degrees across a range of fields of study and levels of university selectivity which are highly heterogeneous depending on quality. The average premium for a Master’s degree is 10 per cent, although women receive significantly higher returns (17-21 per cent) for their degree, compared to men (5-6 per cent). While the acquisition of a Master’s degree could be considered a valuable investment for students in specific graduate fields (e.g., Economics and Management, Mathematics and Computer Science), it may not be as advantageous in other disciplines (e.g., Arts, Humanities, and Agriculture). The analysis also indicates that Master’s degrees offer returns for all university types; however, the returns are higher at more selective institutions. This suggests that, in the context of educational massification, signals of quality are well-received by employers. The present paper adds to the global literature investigating the returns to master’s degrees in different country contexts. Our results complement previous estimates from other countries for graduates returning to education after extended work experience (Minaya et al., 2024; Altonji & Zhong, 2021) by exploring the early outcomes of recent graduates who immediately continued their education. Early career is a core period of professional formation when all the inequalities that will affect socio-economic outcomes are formed, meaning that it should receive more research and policy attention.

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