The study provides the estimation of the return to education with the control for possible ability or selection bias and with endogenous occupational choice. We focus on the Russian labour market as it provides an interesting example of transitional economy. The special focus in this paper is made on the individual choice of occupational type. Previously it has been shown that the occupational type influences significantly the wage on the Russian labour market, but never this variable was treated as endogenous. Nevertheless for the Russian Federation it is necessary to pay special attention to the distribution among occupational types determined by the level of education obtained and to the return to education within each occupational type. This study also examines the return to education among male and female populations separately. We also prove, as previous researches, that the return to education is different for men and women. Furthermore this difference becomes much more significant when we take into account the choice of occupation as endogenous; indeed the wage formation is different between male and female populations.