Essays on Russian labour market issues
Abstract
Being the largest transition economy Russia has interested economists since the
collapse of the USSR. This thesis contributes to the literature on Russian labour
market. In the first chapter I investigate cyclicality of real wages in Russia, the second
chapter looks into consequences of wage arrears for workers' future and the third
chapter develops a model of wage arrears that arise as a result of firms' opportunistic
behaviour. The principal source of data used in this thesis is the Russia Longitudinal
Monitoring Survey (the RLMS).
The first chapter investigates cyclicality of real wages in Russia. The analysis is
carried out both at the country as well as regional levels and the influence of wage
arrears on the cyclicality is examined. The estimated cyclicality coefficient is three to
four times larger in magnitude than those observed for Germany, the UK, the USA
and other developed countries. An increase in unemployment rate by one percentage
point leads to an average reduction in real wages of four percent. The results are
robust to changes in sample period and estimation technique. Wage arrears do not
prove to be the driving force of this strong procyclicality.
The second chapter investigates influence of wage arrears on the future of affected
workers. Limited dependent variable models are used to analyse the effects of wage
arrears on the probability of future wage arrears and frequent separation from employers.
Difference-in-difference approach is used to analyse effects on earnings. The
results suggest that affected workers are twice as likely to experience wage arrears
again within next three years. Job-movers are able to decrease the probability of
repeated wage arrears by nine percentage points. The effect on separations is more
modest: affected workers are approximately forty percent more likely to change jobs
the following year and eleven percent more likely to experience frequent separations
within five years after wage arrears. The effect on future earnings is relatively small
and short-lived. Take-home wages decrease by 1 000 RUB compared to unaffected
workers and recover within the following year. Analysis of stocks and flows of wage
arrears indicates that in the period from 1998 to 2012 on average three quarters of
wage debts were repaid.
The third chapter picks up the discussion of the nature of wage arrears in Russia.
An indirect evidence suggests that sometimes the firms choose to withhold wages
despite having the resources to pay and in certain circumstances the employees accept
it. The chapter presents a model of wage arrears that is based on worker-firm
interactions. Calibration to the Russian data indicates that the parameter values
observed in the RLMS dataset are consistent with a stable equilibrium in which an
approximately half of the labour force experience late payments. The model predicts
average duration of wage arrears of four months. This prediction is consistent with
the Russian reality in the late 1990s.