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Compensating differentials in emerging labor and housing markets: Estimates of quality of life in Russian cities

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  • Berger, Mark C.
  • Blomquist, Glenn C.
  • Sabirianova Peter, Klara

Abstract

The purpose of this paper is to see if an equilibrium model of compensating differences for amenities can be applied to a major transition economy, Russia. We analyze Russian labor and housing markets using data from the Russian Longitudinal Monitoring Survey (RLMS) augmented by city and regional-specific characteristics from other sources. Our estimated wage and housing value equations suggest that workers are compensated for differences in climate, environmental conditions, ethnic conflicts, crime rates, and health conditions, after controlling for worker characteristics, occupation, industry, and economic conditions, and various housing characteristics. We find evidence that these compensating differentials exist even after controlling for the regional pay differences ("regional coefficients") used by the Russian government to compensate public sector workers for living in regions that are designated as less desirable. Quality of life, as measured by a group of eleven amenities, varies substantially. The highest ranked cities tend to be in relatively warm areas and areas in the western, European part of the country. Our quality of life index is positively correlated with net migration into a region, suggesting workers are attracted to amenity-rich locations. Overall, we find that a model of compensating differentials with controls for disequilibrium yields useful information about compensation for location-specific amenities and quality of life in this large transition economy.

Suggested Citation

  • Berger, Mark C. & Blomquist, Glenn C. & Sabirianova Peter, Klara, 2008. "Compensating differentials in emerging labor and housing markets: Estimates of quality of life in Russian cities," Journal of Urban Economics, Elsevier, vol. 63(1), pages 25-55, January.
    • Handle: RePEc:eee:juecon:v:63:y:2008:i:1:p:25-55
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    More about this item

    Keywords

    Compensating differentials Amenities Hedonic implicit prices Quality of life Transition economy;

    JEL classification:

    • D5 - Microeconomics - - General Equilibrium and Disequilibrium
    • H4 - Public Economics - - Publicly Provided Goods
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers
    • P2 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies
    • P3 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions
    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation
    • R1 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics
    • R2 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis

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