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Enterprise restructuring and social benefits

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  • Simon Commander
  • Mark Schankerman
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    Abstract

    Soviet era firms provided generous social benefits, including health and child care. Despite recent cuts, firm survey data show that benefits have remained a major component of total compensation. With benefits largely firm-specific and firms dominated by insiders, continuing attachment of workers as well as widespread informal sector participation has resulted. This has impeded restructuring, in part by generating significant set-up costs for new private firms. We simulate the effects of a cut in subsidies to benefits provision. We show that while this leads to falls in benefits and employment and an increase in wages, the outcome critically depends on the availability of alternative providers. The key to cushioning these adverse consequences is the stimulation of a market in benefits provision. Given initial conditions, rapid removal of benefits supports will require transitional income support scheme of transitional support and show that it can be financed from the savings from removal of current subsidies to benefits. Copyright The European Bank for Reconstruction and Development, 1997.

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    Bibliographic Info

    Article provided by The European Bank for Reconstruction and Development in its journal Economics of Transition.

    Volume (Year): 5 (1997)
    Issue (Month): 1 (05)
    Pages: 1-24

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    Handle: RePEc:bla:etrans:v:5:y:1997:i:1:p:1-24

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    Cited by:
    1. Schröder, Philipp J.H., 2000. "On Privatisation and Restructuring," MPRA Paper 89, University Library of Munich, Germany, revised 2006.
    2. Fabian Bornhorst & Simon Commander & UNICEF - United Nations Children's Fund, 2005. "Integration and the Well-being of Children in the Transition Economies," Innocenti Working Papers inwopa05/31, UNICEF Innocenti Research Centre.
    3. John Flemming & John Micklewright, 1999. "Income Distribution, Economic Systems and Transition," Innocenti Occasional Papers, Economic Policy Series iopeps99/69, UNICEF Innocenti Research Centre.
    4. Atanas Christev & Hans-Peter Weikard, 1999. "Social benefits and the enterprise : some recent evidence from Bulgaria and Poland," Finanzwissenschaftliche Diskussionsbeiträge : Specials series: Industrial and social policies in countries in transition S-18, Universität Potsdam, Wirtschafts- und Sozialwissenschaftliche Fakultät.
    5. Juurikkala, Tuuli & Lazareva, Olga, 2006. "Non-wage benefits, costs of turnover, and labor attachment: Evidence from Russian firms," BOFIT Discussion Papers 4/2006, Bank of Finland, Institute for Economies in Transition.
    6. Guido Friebel & Sergei Guriev, 2000. "Should I Stay or Can I Go? Worker Attachment in Russia," Working Papers w0008, Center for Economic and Financial Research (CEFIR).
    7. Guriev, Sergei & Rachinsky, Andrei, 2006. "The Evolution of Personal Wealth in the Former Soviet Union and Central and Eastern Europe," Working Paper Series RP2006/120, World Institute for Development Economic Research (UNU-WIDER).
    8. Leppänen, Simo & Linden, Mikael & Solanko, Laura, 2012. "Firms, public good provision and institutional uncertainty: Evidence from Russia," Economic Systems, Elsevier, vol. 36(4), pages 522-530.
    9. Schroder, Philipp J. H., 2001. "On the speed and boundaries of structural adjustment when fiscal policy is tight," Economic Systems, Elsevier, vol. 25(4), pages 345-364, December.
    10. Tichit, Ariane, 2006. "The optimal speed of transition revisited," European Journal of Political Economy, Elsevier, vol. 22(2), pages 349-369, June.

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