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Enterprise restructuring and social benefits

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  • Simon Commander
  • Mark Schankerman

Abstract

Soviet era firms provided generous social benefits, including health and child care. Despite recent cuts, firm survey data show that benefits have remained a major component of total compensation. With benefits largely firm-specific and firms dominated by insiders, continuing attachment of workers as well as widespread informal sector participation has resulted. This has impeded restructuring, in part by generating significant set-up costs for new private firms. We simulate the effects of a cut in subsidies to benefits provision. We show that while this leads to falls in benefits and employment and an increase in wages, the outcome critically depends on the availability of alternative providers. The key to cushioning these adverse consequences is the stimulation of a market in benefits provision. Given initial conditions, rapid removal of benefits supports will require transitional income support scheme of transitional support and show that it can be financed from the savings from removal of current subsidies to benefits. Copyright The European Bank for Reconstruction and Development, 1997.

Suggested Citation

  • Simon Commander & Mark Schankerman, 1997. "Enterprise restructuring and social benefits," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 5(1), pages 1-24, May.
  • Handle: RePEc:bla:etrans:v:5:y:1997:i:1:p:1-24
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    References listed on IDEAS

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    Cited by:

    1. Pertti Haaparanta & Tuuli Juurikkala & Olga Lazareva & Jukka Pirttila & Laura Solanko & Ekaterina Zhuravskaya, 2003. "Firms And Public Service Provision In Russia," Working Papers w0041, Center for Economic and Financial Research (CEFIR).
    2. Guriev, Sergei & Rachinsky, Andrei, 2006. "The Evolution of Personal Wealth in the Former Soviet Union and Central and Eastern Europe," WIDER Working Paper Series 120, World Institute for Development Economic Research (UNU-WIDER).
    3. Juurikkala, Tuuli & Lazareva, Olga, 2006. "Non-wage benefits, costs turnover, and labor attachment : evidence from Russian firms," BOFIT Discussion Papers 4/2006, Bank of Finland, Institute for Economies in Transition.
    4. Flemming, J.S. & Micklewright, John, 2000. "Income distribution, economic systems and transition," Handbook of Income Distribution,in: A.B. Atkinson & F. Bourguignon (ed.), Handbook of Income Distribution, edition 1, volume 1, chapter 14, pages 843-918 Elsevier.
    5. Leppänen, Simo & Linden, Mikael & Solanko, Laura, 2009. "Firm behavior under production uncertainty : Evidence from Russia," BOFIT Discussion Papers 16/2009, Bank of Finland, Institute for Economies in Transition.
    6. Tuuli Juurikkala & Olga Lazareva, 2006. "Non-wage benefits, costs of turnover, and labor attachment: evidence from Russian firms," Working Papers w0062, Center for Economic and Financial Research (CEFIR).
    7. Leppänen, Simo & Linden, Mikael & Solanko, Laura, 2012. "Firms, public good provision and institutional uncertainty: Evidence from Russia," Economic Systems, Elsevier, vol. 36(4), pages 522-530.
    8. Tichit, Ariane, 2006. "The optimal speed of transition revisited," European Journal of Political Economy, Elsevier, vol. 22(2), pages 349-369, June.
    9. Atanas Christev & Hans-Peter Weikard, 1999. "Social benefits and the enterprise : some recent evidence from Bulgaria and Poland," Finanzwissenschaftliche Diskussionsbeiträge : Specials series: Industrial and social policies in countries in transition S-18, Universität Potsdam, Wirtschafts- und Sozialwissenschaftliche Fakultät.
    10. Juurikkala, Tuuli & Lazareva, Olga, 2006. "Lobbying at the local level : social assets in Russian firms," BOFIT Discussion Papers 1/2006, Bank of Finland, Institute for Economies in Transition.
    11. Schroder, Philipp J. H., 2001. "On the speed and boundaries of structural adjustment when fiscal policy is tight," Economic Systems, Elsevier, vol. 25(4), pages 345-364, December.
    12. Guido Friebel & Sergei Guriev, 2000. "Should I Stay or Can I Go? Worker Attachment in Russia," Working Papers w0008, Center for Economic and Financial Research (CEFIR).
    13. Fabian Bornhorst & Simon Commander, 2005. "Integration and the Well-being of Children in the Transition Economies," Papers inwopa05/31, Innocenti Working Papers.
    14. Schröder, Philipp J.H., 2000. "On Privatisation and Restructuring," MPRA Paper 89, University Library of Munich, Germany, revised 2006.
    15. Guido Friebel & Sergei Guriev, 2005. "Attaching Workers through In-Kind Payments: Theory and Evidence from Russia," World Bank Economic Review, World Bank Group, vol. 19(2), pages 175-202.

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