Attaching Workers through In-Kind Payments: Theory and Evidence from Russia
AbstractExternal shocks may cause a decline in the productivity of fixed capital in certain regions of an economy. Exogenous obstacles to migration make it hard for workers in those regions to reallocate to more prosperous regions. In addition, firms may devise "attachment" strategies to keep workers from moving out of a local labor market. When workers are compensated in kind, they find it difficult to raise the cash needed for migration. This endogenous obstacle to migration has not yet been considered in the literature. The article shows that the feasibility of attachment depends on the inherited structure of local labor markets: attachment can exist in equilibrium only if the labor market is sufficiently concentrated. Attachment is beneficial for both employers and employees but hurts the unemployed and the self-employed. An analysis of matched household-firm data from the Russian Federation corroborates the theory. Copyright 2005, Oxford University Press.
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Bibliographic InfoArticle provided by World Bank Group in its journal The World Bank Economic Review.
Volume (Year): 19 (2005)
Issue (Month): 2 ()
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Other versions of this item:
- Guido Friebel & Sergei Guriev, 2005. "Attaching Workers Through In-kind Payments: Theory and Evidence from Russia," Working Papers w0057, Center for Economic and Financial Research (CEFIR).
- J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
- M42 - Business Administration and Business Economics; Marketing; Accounting - - Accounting - - - Auditing
- O15 - Economic Development, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
- P31 - Economic Systems - - Socialist Institutions and Their Transitions - - - Socialist Enterprises and Their Transitions
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