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How Late to Pay? Understanding Wage Arrears in Russia

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Author Info

  • John S. Earle

    (W.E. Upjohn Institute for Employment Research and Central European University)

  • Klara Z. Sabirianova

    (William Davidson Institute, University of Michigan Business School and Ural State University)

Abstract

We organize an empirical analysis of Russian wage arrears around hypotheses concerning factors that create incentives for firms to pay late and for workers to tolerate late payment, both reinforced by a prevalent environment of overdue wages. Our analysis draws upon nationally representative household panel data matched with employer data to show substantial interfirm variation with the probability of arrears positively related to firm age, size, state ownership, and declining performance. Estimation of a constrained multinomial logit model also reveals intrafirm variation related to job tenure and small shareholdings in the firm. Workers tend to have higher arrears in rural regions with low hiring rates, concentrated labor markets, and more prevalent arrears in the past. We argue that wage arrears, unlike wage cuts, have a theoretically ambiguous effect on workers' quit behavior, and we show empirically that the effect varies negatively with the extent of the practice in the local labor market.

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Bibliographic Info

Paper provided by W.E. Upjohn Institute for Employment Research in its series Upjohn Working Papers and Journal Articles with number 02-77.

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Date of creation: Mar 2002
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Handle: RePEc:upj:weupjo:02-77

Note: A revised version of this paper appears in the Journal of Labor Economics, Vol. 20, No. 3 (July 2002). See http://ideas.repec.org/a/ucp/jlabec/v20y2002i3p661-660.html. Please cite this revised version.
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Keywords: Russia; pay; arrears; Earle; Sabirianova; Upjohn;

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References

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  1. Hartmut Lehmann & Jonathan Wadsworth & Alessandro Acquisti, 1999. "Grime and Punishment: Job Insecurity and Wage Arrears in the Russian Federation," CERT Discussion Papers 9907, Centre for Economic Reform and Transformation, Heriot Watt University.
  2. Salop, Joanne & Salop, Steven, 1976. "Self-Selection and Turnover in the Labor Market," The Quarterly Journal of Economics, MIT Press, vol. 90(4), pages 619-27, November.
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  10. Lehmann, Hartmut & Wadsworth, Jonathan & Acquisti, Alessandro, 1999. "Grime and Punishment: Insecurity and Wage Arrears in the Russian Federation," IZA Discussion Papers 65, Institute for the Study of Labor (IZA).
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  14. Lazear, Edward P, 1981. "Agency, Earnings Profiles, Productivity, and Hours Restrictions," American Economic Review, American Economic Association, vol. 71(4), pages 606-20, September.
  15. Joanne Salop & Steve Salop, 1976. "Self-selection and turnover in the labor market," Special Studies Papers 80, Board of Governors of the Federal Reserve System (U.S.).
  16. Brainerd, Elizabeth, 1998. "Winners and Losers in Russia's Economic Transition," American Economic Review, American Economic Association, vol. 88(5), pages 1094-1116, December.
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