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

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  • Guido Friebel
  • Sergei Guriev

Abstract

We relate the phenomena of sluggish interregional labour reallocation, in-kind compensation, and wage arrears in Russia to 'attachment' strategies of firms: being paid in non-monetary forms makes it hard for workers to raise the cash needed for quitting the region. Attachment may facilitate relation-specific investments, but it may also be used to exploit workers because it eliminates workers' outside options. We show that exploitation does not only happen if regional labour markets are monoposonistic. 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 have 19% lower probability to move than workers who do receive their wages in cash.

Suggested Citation

  • Guido Friebel & Sergei Guriev, 1999. "Why Russian Workers Do Not Move: Attachment of Workers Through In-Kind Payments," William Davidson Institute Working Papers Series 283, William Davidson Institute at the University of Michigan.
    • Handle: RePEc:wdi:papers:1999-283
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    Cited by:

    1. Johan F. M. Swinnen & Liesbeth Dries & Karen Macours, 2005. "Transition and agricultural labor," Agricultural Economics, International Association of Agricultural Economists, vol. 32(1), pages 15-34, January.
    2. Pertti Haaparanta & Tuuli Juurikkala & Olga Lazareva & Jukka Pirttila & Laura Solanko & Ekaterina Zhuravskaya, 2003. "Firms And Public Service Provision In Russia," Working Papers w0041, New Economic School (NES).
    3. Jeni Klugman & John Micklewright & Gerry Redmond, 2002. "Poverty in the Transition: Social expenditures and the working-age poor," Papers inwopa02/18, Innocenti Working Papers.
    4. Alessandra Guariglia & Byung‐Yeon Kim, 2006. "The dynamics of moonlighting in Russia," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 14(1), pages 1-45, March.
    5. Guido Friebel & Sergei Guriev, 2005. "Attaching Workers through In-Kind Payments: Theory and Evidence from Russia," The World Bank Economic Review, World Bank Group, vol. 19(2), pages 175-202.
    6. Haney, Michael & Shkaratan, Maria, 2003. "Mine closure and its impact on the community : five years after mine closure in Romania, Russia and Ukraine," Policy Research Working Paper Series 3083, The World Bank.
    7. Ruslan Gurtoviy & Luis G. González, 2008. "How Much to Pay in Cash? Employee Retention via Stock Options," Papers on Strategic Interaction 2004-24, Max Planck Institute of Economics, Strategic Interaction Group.
    8. Fleischman, Gary & Herz, Paul, 2005. "An empirical investigation of trends in barter activity in the Russian Federation," The International Journal of Accounting, Elsevier, vol. 40(1), pages 39-63.
    9. Rozelle, Scott & Swinnen, Johan F.M., 2000. "Transition And Agriculture," Working Papers 11948, University of California, Davis, Department of Agricultural and Resource Economics.
    10. Grosfeld, Irena & Kolenikov, Stanislav & Paltseva, Elena & Sénik-Leygonie, Claudia & Verdier, Thierry, 1999. "Dynamism and Inertia on the Russian Labour Market: A Model of Segmentation," CEPR Discussion Papers 2224, C.E.P.R. Discussion Papers.
    11. Jan J. Rutkowski & Stefano Scarpetta, 2005. "Enhancing Job Opportunities : Eastern Europe and the Former Soviet Union," World Bank Publications - Books, The World Bank Group, number 7408, December.
    12. repec:hal:spmain:info:hdl:2441/5q3gpbfo7i87lpv8gubeo44app is not listed on IDEAS
    13. Yuri Andrienko & Sergei Guriev, 2003. "Determinants of Interregional Mobility in Russia: Evidence from Panel Data," William Davidson Institute Working Papers Series 551, William Davidson Institute at the University of Michigan.
    14. Guido Friebel & Sergei Guriev, 2005. "Attaching Workers through In-Kind Payments: Theory and Evidence from Russia," The World Bank Economic Review, World Bank Group, vol. 19(2), pages 175-202.
    15. Ariane Lambert-Mogiliansky & Konstantin Sonin & Ekaterina Zhuravskaya, 2003. "Capture of Bankruptcy: Theory and Russian Evidence," Working Papers w0038, Center for Economic and Financial Research (CEFIR).
    16. Christopher J. Gerry & Byung-Yeon Kim & Carmen A Li, 2004. "The gender wage gap and wage arrears in Russia: Evidence from the RLMS," Journal of Population Economics, Springer;European Society for Population Economics, vol. 17(2), pages 267-288, June.
    17. Guido Friebel & Sergei Guriev, 2005. "Attaching Workers through In-Kind Payments: Theory and Evidence from Russia," SciencePo Working papers Main hal-03595529, HAL.
    18. Ksenia Yudaeva, 2002. "Globalization and Inequality in CIS Countries: Role of Institutions," Working Papers w0025, Center for Economic and Financial Research (CEFIR).
    19. Linz, Susan J., 2004. "Motivating Russian workers: analysis of age and gender differences," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 33(3), pages 261-289, July.
    20. Grosfeld, Irena & Senik-Leygonie, Claudia & Verdier, Thierry & Kolenikov, Stanislav & Paltseva, Elena, 2001. "Workers' Heterogeneity and Risk Aversion: A Segmentation Model of the Russian Labor Market," Journal of Comparative Economics, Elsevier, vol. 29(2), pages 230-256, June.
    21. Sergei Guriev & Barry W. Ickes, 2000. "Microeconomic Aspects of Economic Growth in Eastern Europe and the Former Soviet Union, 1950-2000," William Davidson Institute Working Papers Series 348, William Davidson Institute at the University of Michigan.
    22. Osborne, Stefan & Trueblood, Michael A., 2001. "An Examination Of Economic Efficiency Of Russian Crop Output In The Reform Period," 2001 Annual meeting, August 5-8, Chicago, IL 20548, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    23. Fardmanesh, Mohsen & Tan, Li, 2003. "Wage and price control policies in transition economies," Journal of Development Economics, Elsevier, vol. 70(1), pages 173-200, February.
    24. Elena Kazakova, 2005. "Wages in a Growing Russia: When is a Ten Percent Rise in the Gender Pay Gap Good News?," CERGE-EI Working Papers wp257, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    25. Laura Solanko, 2002. "Fiscal competition in a transition economy," Public Economics 0209002, University Library of Munich, Germany.

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    JEL classification:

    • B31 - Schools of Economic Thought and Methodology - - History of Economic 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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