The paper investigates adjustment costs of trade liberalization in Russia by estimating the influence of tariff policy in the 90-ies on the level and volatility of employment and wages. In particular, we study the labor demand and labor supply channels and address the following issues. First, how does labor demand by firms respond to trade shocks? Second, what is the effect of trade developments on wage dispersion across sectors? Third, what is the effect of trade changes on the wage gap between skilled and unskilled workers? We use balance sheets of Russian large and medium enterprises for 1995-2001 to estimate labor demand equations and to calculate possible changes in employment due to various shocks in output and tariffs. Our sample comprises of more than 53 thousand enterprises and is nationally and industry-level representative. The analysis of the labor supply channel is based on Russian Longitudinal Monitoring Survey (RLMS), years 1995-2002, matched with sectoral indicators of trade liberalization. RLMS is a nationally representative panel survey of households’ members on a large number of issues. We find low magnitudes of responsiveness of the labor demand to trade shocks, both through the indirect effect of output changes and directly through the influence of tariffs and import penetration. This suggests that the adjustment costs to expected trade liberalization in the form of changes in industrial labor demand should not be high. We also find that trade liberalization does not have a significant effect on wages. It is likely that tariff reduction and trade liberalization would lead to only slight increase in the wage differentials between skilled and unskilled labor. It is obtained that there is no significant effect of tariffs on wages and wage premiums. Therefore, no significant evidence for the claim that “workers in more protected industries earn relatively more” is found. The latter implies that workers would not lose much after further trade liberalization provided they could move to trade exposed industries. The increase in tariff levels is likely to be associated with the increase in wage gap between skilled and unskilled labor. But the evidence for this conclusion is not very strong, because the industry affiliation does not explain much of the wage variation between skilled and unskilled workers. Overall, the adjustment costs of anticipated trade liberalization are likely to be much smaller than expected as the analysis of the influence of previous trade shocks on the Russian economy shows.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by Center for Economic and Financial Research (CEFIR) in its series Working Papers with number
w0086.
Length: 24 pages Date of creation: Apr 2005 Date of revision: Handle: RePEc:cfr:cefirw:w0086
Contact details of provider: Postal: 117418 Russia, Moscow, Nakhimovsky pr., 47, office 720 Phone: +7 (495) 105 50 02 Fax: +7 (495) 105 50 03 Email: Web page: http://www.cefir.ru More information through EDIRC
For technical questions regarding this item, or to correct its listing, contact: (Julia Babich) The email address of this maintainer does not seem to be valid anymore. Please ask Julia Babich to update the entry or send us the correct address..
Did you know? Citation analysis on IDEAS includes online papers that are freely accessible and whose text could be automatically analyzed, currently about 210000 papers.