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Wage Inequality in Russian Economic Transition (1991–2008): Stylized Facts and Explanations

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  • Lukiyanova, A.

    (National Research University - Higher School of Economics, Moscow, Russia)

Abstract

This paper examines the evolution of overall wage inequality in Russia from the early 1990s to the present. We first document the stylized facts and show that inequality in labor earnings increased dramatically early in the transition period and then, albeit more moderately, after the 1998 financial crisis. The trend reversed in the early 2000s wage dispersion has been declining thereafter. Changes in wage inequality were largely driven by the lower end of the wage distribution. The paper reviews and provides a critical discussion of research on wage inequality and wage differentials in Russia and suggests areas where empirical research may provide new insight into the character and causes of recent changes in wage inequality. A common view is that the rise of returns to schooling to market levels and the reallocation of workers from the public sector to the private sector accounts for the bulk of increased wage inequality during transition. However, our analysis demonstrates that these factors explain a relatively small proportion of changes in the wage distribution. We find that wage differences across and within regions and industries do a better job of capturing the dynamics of wage inequality over last two decades. These patterns can be potentially explained by expanding the existing research to other areas including the effects of shocks, organizational changes, minimum wages, rent-sharing, incentive pay structures, wage bargaining regimes.

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File URL: http://www.econorus.org/repec/journl/2011-12-124-147r.pdf
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Bibliographic Info

Article provided by New Economic Association in its journal Journal of the New Economic Association.

Volume (Year): (2011)
Issue (Month): 12 ()
Pages: 124-147

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Handle: RePEc:nea:journl:y:2011:i:12:p:124-147

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Keywords: wage inequality; transition to a market economy; Russia;

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References

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  1. Levy, Frank & Murnane, Richard J, 1992. "U.S. Earnings Levels and Earnings Inequality: A Review of Recent Trends and Proposed Explanations," Journal of Economic Literature, American Economic Association, vol. 30(3), pages 1333-81, September.
  2. Brainerd, Elizabeth, 1998. "Winners and Losers in Russia's Economic Transition," American Economic Review, American Economic Association, vol. 88(5), pages 1094-1116, December.
  3. Ganguli, Ina & Terrell, Katherine, 2005. "Institutions, Markets and Men's and Women's Wage Inequality: Evidence from Ukraine," IZA Discussion Papers 1724, Institute for the Study of Labor (IZA).
  4. Philippe Aghion & Simon Commander, 1999. "On the dynamics of inequality in the transition," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 7(2), pages 275-298, July.
  5. Gorodnichenko, Yuriy & Sabirianova Peter, Klara, 2005. "Returns to schooling in Russia and Ukraine: A semiparametric approach to cross-country comparative analysis," Journal of Comparative Economics, Elsevier, vol. 33(2), pages 324-350, June.
  6. Juhn, Chinhui & Murphy, Kevin M & Pierce, Brooks, 1993. "Wage Inequality and the Rise in Returns to Skill," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 410-42, June.
  7. Klara Sabirianova Peter, 2003. "Skill-Biased Transition: The Role of Markets, Institutions, and Technological Change," William Davidson Institute Working Papers Series 2003-616, William Davidson Institute at the University of Michigan.
  8. Commander, Simon & Kollo, Janos, 2004. "The Changing Demand for Skills: Evidence from the Transition," IZA Discussion Papers 1073, Institute for the Study of Labor (IZA).
  9. John Flemming & John Micklewright, 1999. "Income Distribution, Economic Systems and Transition," Innocenti Occasional Papers, Economic Policy Series iopeps99/69, UNICEF Innocenti Research Centre.
  10. Atkinson,Anthony Barnes & Micklewright,John, 1992. "Economic Transformation in Eastern Europe and the Distribution of Income," Cambridge Books, Cambridge University Press, number 9780521433297, October.
  11. Simon Clarke, 2002. "Market and institutional determinants of wage differentiation in Russia," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 55(4), pages 628-648, July.
  12. Richard B. Freeman & Lawrence F. Katz, 1995. "Differences and Changes in Wage Structures," NBER Books, National Bureau of Economic Research, Inc, number free95-1, May.
  13. Eswar Prasad & Michael P. Keane, 2002. "Changes in the Structure of Earnings During the Polish Transition," IMF Working Papers 02/135, International Monetary Fund.
  14. Ingo Geishecker & John P. Haisken-DeNew, 2002. "Riding the Transition Roller-Coaster: Flexibility and the Inter-Industry Wage Structure in Russia," Discussion Papers of DIW Berlin 280, DIW Berlin, German Institute for Economic Research.
  15. David Card & John E. DiNardo, 2002. "Skill-Biased Technological Change and Rising Wage Inequality: Some Problems and Puzzles," Journal of Labor Economics, University of Chicago Press, vol. 20(4), pages 733-783, October.
  16. Hartmut Lehmann & Jonathan Wadsworth, 2001. "Wage Arrears and the Distribution of Earnings in Russia," William Davidson Institute Working Papers Series 421, William Davidson Institute at the University of Michigan.
  17. Elizabeth Brainerd, 2000. "Women in transition: Changes in gender wage differentials in Eastern Europe and the former Soviet Union," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 54(1), pages 138-162, October.
  18. Katz, Lawrence F. & Autor, David H., 1999. "Changes in the wage structure and earnings inequality," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 26, pages 1463-1555 Elsevier.
  19. Walsh, Patrick Paul & Sibley, Christopher W., 2002. "Earnings Inequality and Transition: A Regional Analysis of Poland," IZA Discussion Papers 441, Institute for the Study of Labor (IZA).
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