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Workers' heterogeneity and risk aversion: a segmentation model of the Russian labor market

Workers' heterogeneity and risk aversion: a segmentation model of the Russian labor market
Workers' heterogeneity and risk aversion: a segmentation model of the Russian labor market
This paper proposes an explanation of the puzzling coexistence of elements of both inertia and dynamism in the Russian labor market. In an environment of high uncertainty, risk averse and heterogeneous workers face a trade-off between wages and insurance against risk. The firm proposes a contract that includes a low monetary wage and access to social services. Workers choose to accept the contract or to leave the firm. Their choice gives rise to ex post segmentation: the most productive workers leave the firm and concentrate in the most productive firms; the less adaptive workers remain in their initial firm, where they accept lower wages as a price for security. In this framework, wage arrears can be viewed as an element of the implicit contract between firms and less productive workers. We test the relevance of this model using a panel data set containing 9,233 Russian firms for 1993 to 1998 as well as a subsample for which we have information on firms' wage arrears.
0147-5967
230-256
Grosfeld, Irena
63efac39-db6f-4d12-ad91-bcdaf5804cfe
Senik-Leygonie, Claudia
4b24d55a-2e17-4ed8-80d1-ffcd356d6c4d
Verdier, Thierry
87c483ea-f473-408f-9776-d0381cab6454
Kolenikov, Stanislav
0bbb0a13-80c4-49a6-baa7-3e9d931aa8ad
Paltseva, Elena
616a7c8f-9ab6-4eba-9ec4-3142e137d44e
Grosfeld, Irena
63efac39-db6f-4d12-ad91-bcdaf5804cfe
Senik-Leygonie, Claudia
4b24d55a-2e17-4ed8-80d1-ffcd356d6c4d
Verdier, Thierry
87c483ea-f473-408f-9776-d0381cab6454
Kolenikov, Stanislav
0bbb0a13-80c4-49a6-baa7-3e9d931aa8ad
Paltseva, Elena
616a7c8f-9ab6-4eba-9ec4-3142e137d44e

Grosfeld, Irena, Senik-Leygonie, Claudia, Verdier, Thierry, Kolenikov, Stanislav and Paltseva, Elena (2001) Workers' heterogeneity and risk aversion: a segmentation model of the Russian labor market. Journal of Comparative Economics, 29 (2), 230-256. (doi:10.1006/jcec.2001.1711).

Record type: Article

Abstract

This paper proposes an explanation of the puzzling coexistence of elements of both inertia and dynamism in the Russian labor market. In an environment of high uncertainty, risk averse and heterogeneous workers face a trade-off between wages and insurance against risk. The firm proposes a contract that includes a low monetary wage and access to social services. Workers choose to accept the contract or to leave the firm. Their choice gives rise to ex post segmentation: the most productive workers leave the firm and concentrate in the most productive firms; the less adaptive workers remain in their initial firm, where they accept lower wages as a price for security. In this framework, wage arrears can be viewed as an element of the implicit contract between firms and less productive workers. We test the relevance of this model using a panel data set containing 9,233 Russian firms for 1993 to 1998 as well as a subsample for which we have information on firms' wage arrears.

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Published date: 2001

Identifiers

Local EPrints ID: 39687
URI: http://eprints.soton.ac.uk/id/eprint/39687
ISSN: 0147-5967
PURE UUID: 647ddbb0-56d8-43aa-91e0-ca7824886b84

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Date deposited: 29 Jun 2006
Last modified: 15 Mar 2024 08:16

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Contributors

Author: Irena Grosfeld
Author: Claudia Senik-Leygonie
Author: Thierry Verdier
Author: Stanislav Kolenikov
Author: Elena Paltseva

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