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Why Russian Workers Do Not Move: Attachment Of Workers Through In-Kind Payments

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  • Friebel, Guido
  • Guriev, Sergei

Abstract

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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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2368.

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Date of creation: Jan 2000
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Handle: RePEc:cpr:ceprdp:2368

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Keywords: Enterprise Restructuring; Labour Mobility; Lock-In Of Workers; Transition;

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  1. Philippe Aghion & Olivier J. Blanchard, 1994. "On the Speed of Transition in Central Europe," NBER Chapters, in: NBER Macroeconomics Annual 1994, Volume 9, pages 283-330 National Bureau of Economic Research, Inc.
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  11. Ellingsen, Tore, 1998. "Payments in Kind," Working Paper Series in Economics and Finance 244, Stockholm School of Economics, revised 10 Feb 2000.
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