We relate the phenomena of sluggish interregional labour reallocation and in-kind compensation in Russia to 'attachment' strategies of firms: Paying wages in non-monetary forms makes it hard for workers to raise the cash needed for quitting their region in order to find better jobs in more prosperous regions. While attachment may facilitate worker-specific investments that do not pay off if workers are expected to leave, it also eliminates workers' outside options. Hence, firms may use it to exploit workers. Surprisingly, exploitation through attachment does not only occur in monopsonistic regional labour markets. Even if there is some competition, all firms in a region may use attachment strategies. Here, workers are locked-in and do not receive any compensation for their forgone option to move. Data of the Russian Longitudinal Monitoring Survey (RLMS) support our theory. Workers who receive in-kind payments are less probable to move than workers who do receive their wages in cash.
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Find related papers by JEL classification: B31 - Schools of Economic Thought and Methodology - - History of Thought: Individuals - - - Individuals D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
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