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Labor Market Discrimination During Post-Communist Transition: A Monopsony Approach to the Status of Latvia's Russian Minority

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  • Robert S. Chase
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    Abstract

    Conventional wisdom suggests that during communism, tastes for discrimination were suppressed. In partial explanation for ethnic tensions observed following central planning, economic liberalization allows those tastes to be expressed. This paper explores the feasibility of monopsony as an economic structure supportive of discrimination during transition, using Latvia's ethnic Russians as a case study. Measuring employment concentration and earnings differentials across regions, monopsony appears prevalent in the country. A monopsony explanation requires Russians to have lower labor supply elasticity than Latvians, a condition which estimates for participation probability confirm. Earnings decompositions show that though Russians are paid more than Latvians on average, given their human capital characteristics, they suffer earnings discrimination of between 5.5 and 7.3 percent. In addition, compared with Latvians the likelihood that Russians will be unemployed is greater, though Russians are less likely to register for unemployment services. This evidence suggests that lack of integrated, flexible labor markets in Latvia, and the monopsony which results, have supported labor market discrimination against Russians during transition.

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    File URL: http://www.wdi.umich.edu/files/Publications/WorkingPapers/wp381.pdf
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    Bibliographic Info

    Paper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number 381.

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    Length: pages
    Date of creation: 01 Aug 2001
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    Handle: RePEc:wdi:papers:2001-381

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    1. Ransom, Michael R, 1993. "Seniority and Monopsony in the Academic Labor Market," American Economic Review, American Economic Association, American Economic Association, vol. 83(1), pages 221-33, March.
    2. Ham, John C & Svejnar, Jan & Terrell, Katherine, 1998. "Unemployment and the Social Safety Net during Transitions to a Market Economy: Evidence from the Czech and Slovak Republics," American Economic Review, American Economic Association, American Economic Association, vol. 88(5), pages 1117-42, December.
    3. Gottfries, N. & Mccormick, B., 1990. "Discrimination And Open Unemployment In A Segmented Labour Market," Papers, Stockholm - International Economic Studies 460, Stockholm - International Economic Studies.
    4. Oaxaca, Ronald L. & Ransom, Michael R., 1994. "On discrimination and the decomposition of wage differentials," Journal of Econometrics, Elsevier, Elsevier, vol. 61(1), pages 5-21, March.
    5. Charles Kroncke & Kenneth Smith, 1999. "The wage effects of ethnicity in Estonia," The Economics of Transition, The European Bank for Reconstruction and Development, The European Bank for Reconstruction and Development, vol. 7(1), pages 179-199, March.
    6. Price V. Fishback, 1998. "Operations of "Unfettered" Labor Markets: Exit and Voice in American Labor Markets at the Turn of the Century," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 36(2), pages 722-765, June.
    7. John P. Haisken-DeNew & Christoph M. Schmidt, 2000. "Interindustry and Interregion Differentials: Mechanics and Interpretation," The Review of Economics and Statistics, MIT Press, vol. 79(3), pages 516-521, August.
    8. Marek GÕra & Christoph M. Schmidt, 1998. "Long-term unemployment, unemployment benefits and social assistance: The Polish experience," Empirical Economics, Springer, Springer, vol. 23(1/2), pages 55-85.
    9. Becker, Gary S., 1971. "The Economics of Discrimination," University of Chicago Press Economics Books, University of Chicago Press, edition 1, number 9780226041162, June.
    10. Robert S. Chase, 1998. "Markets for communist human capital: Returns to education and experience in the Czech republic and Slovakia," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 51(3), pages 401-423, April.
    11. Tomasz Mickiewicz, 1998. "Dismantling the state sector in Eastern Europe: Implications for unemployment," Post-Communist Economies, Taylor & Francis Journals, Taylor & Francis Journals, vol. 10(1), pages 47-62.
    12. Cotton, Jeremiah, 1988. "On the Decomposition of Wage Differentials," The Review of Economics and Statistics, MIT Press, vol. 70(2), pages 236-43, May.
    13. Brainerd, Elizabeth, 1998. "Winners and Losers in Russia's Economic Transition," American Economic Review, American Economic Association, American Economic Association, vol. 88(5), pages 1094-1116, December.
    14. Van Kolpin & Larry Singell Jr., 1997. "Asymmetric information, strategic behavior, and discrimination in the labor market," Economic Theory, Springer, Springer, vol. 10(1), pages 175-184.
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