Advanced Search
MyIDEAS: Login to save this paper or follow this series

Contract Violations, Neighborhood Effects, And Wage Arrears In Russia

Contents:

Author Info

  • John S. Earle

    ()

  • Klara Sabirianova Peter

    ()

Abstract

We present a model of neighborhood effects in wage payment delays. Positive feedback arises because each employer’s arrears affect the late payment costs faced by other firms in the same local labor market, resulting in a strategic complementarity in the practice. The model is estimated on panel data for workers and firms in Russia, facilitating identification through the use of a rich set of covariates and fixed effects for employees, employers, and local labor markets. We also exploit a policy intervention affecting public sector workers that provides an instrumental variable to estimate the endogenous reaction in the non-public sector. Consistently across specifications, the estimated reaction function displays strongly positive neighborhood effects, and the estimates of four feedback loops – operating through worker quits, effort, strikes, and legal penalties – imply that costs of delays are attenuated by neighborhood arrears. We also study a nonlinear case exhibiting two stable equilibria: a “punctual payment equilibrium” and a “late payment equilibrium.” The estimates imply that the theoretical conditions for multiple equilibria under symmetric local labor market competition are satisfied in our data.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.wdi.umich.edu/files/Publications/WorkingPapers/wp708.pdf
Download Restriction: no

Bibliographic Info

Paper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number 2004-708.

as in new window
Length: 49 pages
Date of creation: 01 Jul 2004
Date of revision:
Handle: RePEc:wdi:papers:2004-708

Contact details of provider:
Postal: 724 E. University Ave, Wyly Hall 1st Flr, Ann Arbor MI 48109
Phone: 734 763-5020
Fax: 734 763 5850
Email:
Web page: http://www.wdi.umich.edu
More information through EDIRC

Related research

Keywords: wage arrears; contract violation; neighborhood effect; social interactions; multiple equilibria; network externality; strategic complementarity; transition; Russia.;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Brock, William A. & Durlauf, Steven N., 2001. "Interactions-based models," Handbook of Econometrics, Elsevier, in: J.J. Heckman & E.E. Leamer (ed.), Handbook of Econometrics, edition 1, volume 5, chapter 54, pages 3297-3380 Elsevier.
  2. Freeman, Richard B, 1980. "The Exit-Voice Tradeoff in the Labor Market: Unionism, Job Tenure, Quits, and Separations," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 94(4), pages 643-73, June.
  3. John S. Earle & Klara Z. Sabirianova, 2002. "How Late to Pay? Understanding Wage Arrears in Russia," Upjohn Working Papers and Journal Articles, W.E. Upjohn Institute for Employment Research 02-77, W.E. Upjohn Institute for Employment Research.
  4. Akerlof, George A, 1982. "Labor Contracts as Partial Gift Exchange," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 97(4), pages 543-69, November.
  5. A Aquisti & H Lehmann & Jonathan Wadsworth, 1998. "Grime and Punishment: Job Insecurity and Wage Arrears in the Russian Federation," CEP Discussion Papers, Centre for Economic Performance, LSE dp0403, Centre for Economic Performance, LSE.
  6. David, Paul A, 1985. "Clio and the Economics of QWERTY," American Economic Review, American Economic Association, American Economic Association, vol. 75(2), pages 332-37, May.
  7. Arthur, W Brian, 1989. "Competing Technologies, Increasing Returns, and Lock-In by Historical Events," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 99(394), pages 116-31, March.
  8. Richard Layard & Ansgar Richter, 1995. "How Much Unemployment is Needed for Restructuring?: The Russian Experience," CEP Discussion Papers, Centre for Economic Performance, LSE dp0238, Centre for Economic Performance, LSE.
  9. Walter Y. Oi, 1962. "Labor as a Quasi-Fixed Factor," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 70, pages 538.
  10. repec:att:wimass:9127 is not listed on IDEAS
  11. Yuri Andrienko & Sergei Guriev, 2003. "Determinants of Interregional Mobility in Russia: Evidence from Panel Data," William Davidson Institute Working Papers Series, William Davidson Institute at the University of Michigan 551, William Davidson Institute at the University of Michigan.
  12. Sah, R.K., 1990. "Social Osmosis And Patterns Of Crime: A Dynamic Economic Analysis," Papers, Yale - Economic Growth Center 609, Yale - Economic Growth Center.
  13. Lee, Kevin C & Pesaran, M Hashem, 1993. "The Role of Sectoral Interactions in Wage Determination in the UK Economy," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 103(416), pages 21-55, January.
  14. Glaeser, Edward L & Sacerdote, Bruce & Scheinkman, Jose A, 1996. "Crime and Social Interactions," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 111(2), pages 507-48, May.
  15. Manski, Charles F, 1993. "Identification of Endogenous Social Effects: The Reflection Problem," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 60(3), pages 531-42, July.
  16. Brown, J David & Earle, John S, 2002. "The Reallocation of Workers and Jobs in Russian Industry: New Evidence on Measures and Determinants," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3663, C.E.P.R. Discussion Papers.
  17. Katz, Michael L & Shapiro, Carl, 1986. "Technology Adoption in the Presence of Network Externalities," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 94(4), pages 822-41, August.
  18. Acemoglu, Daron, 1997. "Training and Innovation in an Imperfect Labour Market," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 64(3), pages 445-64, July.
  19. Levine, David I. & Parkin, Richard J., 1994. "Work organization, employment security, and macroeconomic stability," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 24(3), pages 251-271, August.
  20. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, American Economic Association, vol. 74(3), pages 433-44, June.
  21. Greif, Avner & Milgrom, Paul & Weingast, Barry R, 1994. "Coordination, Commitment, and Enforcement: The Case of the Merchant Guild," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 102(4), pages 745-76, August.
  22. Milgrom, Paul & Roberts, John, 1990. "Rationalizability, Learning, and Equilibrium in Games with Strategic Complementarities," Econometrica, Econometric Society, Econometric Society, vol. 58(6), pages 1255-77, November.
  23. Evans, William N & Oates, Wallace E & Schwab, Robert M, 1992. "Measuring Peer Group Effects: A Study of Teenage Behavior," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 100(5), pages 966-91, October.
  24. Mathias Dewatripont & Gérard Roland, 1997. "Transition as a process of large-scale institutional change," ULB Institutional Repository 2013/9659, ULB -- Universite Libre de Bruxelles.
  25. 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).
  26. Christophe Chamley, 1999. "Coordinating Regime Switches," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 114(3), pages 869-905, August.
  27. Blume,L.E. & Durlauf,S.N., 2000. "The interactions-based approach to socioeconomic behavior," Working papers, Wisconsin Madison - Social Systems 1, Wisconsin Madison - Social Systems.
  28. Rosen, Sherwin, 1974. "Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 82(1), pages 34-55, Jan.-Feb..
  29. Greif, Avner, 1993. "Contract Enforceability and Economic Institutions in Early Trade: the Maghribi Traders' Coalition," American Economic Review, American Economic Association, American Economic Association, vol. 83(3), pages 525-48, June.
  30. Kiyotaki, Nobuhiro, 1988. "Multiple Expectational Equilibria under Monopolistic Competition," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 103(4), pages 695-713, November.
  31. Kennan, John, 1987. "The economics of strikes," Handbook of Labor Economics, Elsevier, in: O. Ashenfelter & R. Layard (ed.), Handbook of Labor Economics, edition 1, volume 2, chapter 19, pages 1091-1137 Elsevier.
  32. Murphy, Kevin M & Shleifer, Andrei & Vishny, Robert W, 1989. "Industrialization and the Big Push," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 97(5), pages 1003-26, October.
  33. Azariadis, Costas & Drazen, Allan, 1990. "Threshold Externalities in Economic Development," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 105(2), pages 501-26, May.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Linz, Susan J. & Semykina, Anastasia, 2008. "How do workers fare during transition? Perceptions of job insecurity among Russian workers, 1995-2004," Labour Economics, Elsevier, Elsevier, vol. 15(3), pages 442-458, June.
  2. Hartmut Lehmann & Norberto Pignatti & Jonathan Wadsworth, 2005. "The Incidence and Cost of Job Loss in the Ukrainian Labor Market," Upjohn Working Papers and Journal Articles, W.E. Upjohn Institute for Employment Research 05-122, W.E. Upjohn Institute for Employment Research.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:wdi:papers:2004-708. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Laurie Gendron).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.