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Wage Policies of a Russian Firm and the Financial Crisis of 1998: Evidence from Personnel Data – 1997 to 2002

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Author Info

  • Dohmen, Thomas

    ()
    (University of Bonn)

  • Lehmann, Hartmut

    ()
    (University of Bologna)

  • Schaffer, Mark E

    ()
    (Heriot-Watt University, Edinburgh)

Abstract

We use a rich personnel data set from a Russian firm for the years 1997 to 2002 to analyze how the financial crisis in 1998 and the resulting change in external labor market conditions affect the wages and the welfare of workers inside a firm. We provide evidence that large shocks to external conditions affect the firm’s personnel policies, and show that the burden of the shock is not evenly spread across the workforce. The firm takes advantage of a high-inflationary environment and of a fall in workers’ outside options after the financial crisis and cuts real wages. Earnings are curbed most for those who earned the highest rents, resulting in a strong compression of real wages. The fact that real wages and real compensation levels never recovered to pre-crisis levels even though the firm’s financial situation was better in 2002 than before the crisis and the differential treatment of employee groups within the firm can be taken as evidence that market forces strongly influence the wage policies of our firm.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3350.

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Length: 66 pages
Date of creation: Feb 2008
Date of revision:
Handle: RePEc:iza:izadps:dp3350

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Keywords: internal labor markets; Russia; personnel data; wage policies of a firm;

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References

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  1. David Card & Dean Hyslop, 1997. "Does Inflation “Grease the Wheels of the Labor Market”?," NBER Chapters, in: Reducing Inflation: Motivation and Strategy, pages 71-122 National Bureau of Economic Research, Inc.
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  6. Joseph G. Altonji & Paul J. Devereux, 1999. "The Extent and Consequences of Downward Nominal Wage Rigidity," NBER Working Papers 7236, National Bureau of Economic Research, Inc.
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  15. Lerman, Robert I & Yitzhaki, Shlomo, 1985. "Income Inequality Effects by Income," The Review of Economics and Statistics, MIT Press, vol. 67(1), pages 151-56, February.
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Cited by:
  1. Thomas Dohmen & Hartmut Lehmann & Anzelika Zaiceva, 2008. "The Gender Earnings Gap inside a Russian Firm: First Evidence from Personnel Data - 1997 to 2002 ; Updated Version," ESCIRRU Working Papers 6, DIW Berlin, German Institute for Economic Research.

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