Structure and Distribution of Earnings in Russia, 1994–2003

The paper documents changes in the structure of earnings and earnings inequality in Russia for the period 1994–2003 using the RLMS data. The period covers few years of the transformational recession (1994–1998), the financial crisis in 1998 and the first years of economic recovery (2000–2003). A regression-based decomposition reveals that within-group inequality plays the largest, yet diminishing, role. Among the explanatory variables, the largest proportion of earnings dispersion (75%–80% of the explained level of inequality) is explained by the geographical variables and job characteristics. The decomposition results suggest that the rise in inequality after the financial crisis of 1998 is likely to be a result of the differences in the adjustment speeds across regions and industries. Employer ownership is only marginally important; however, its effect has been steadily increasing for women due to the increase in the public-private sector wage gap. Contrary to the initial expectations, the wage inequality in the public sector was different from that in the private sector: both were of a similar level and followed similar patterns of changes.