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Do wages grow with experience? Deciphering the Russian puzzle

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  • Chernina, Eugenia
  • Gimpelson, Vladimir

Abstract

In all available cross-sectional data, the trajectory of the observed wage–experience profile of Russian workers is flat, peaks early, and declines sharply afterwards. This shape looks puzzling since it differs starkly from that observed in both developed and developing countries. We show that a proper interpretation of the wage–experience profile is hindered by the age-period-cohort problem, when the effects of time, cohort, and experience on the wage growth are mixed. Our study uses survey data from Russia covering the years 2000–2019. Relying on human capital theory, we disentangle the experience, period and cohort effects. With certain assumptions concerning human capital depreciation due to aging, our results show that Russian wages do grow monotonically with experience. However, this growth after mid-career is offset by the cohort effect that proceeds in the opposite direction, thus reflecting massive obsolescence of the human capital of workers from older cohorts. Meanwhile, the time effect mirrors the general GDP path as well as all booms and busts over the period.

Suggested Citation

  • Chernina, Eugenia & Gimpelson, Vladimir, 2023. "Do wages grow with experience? Deciphering the Russian puzzle," Journal of Comparative Economics, Elsevier, vol. 51(2), pages 545-563.
    • Handle: RePEc:eee:jcecon:v:51:y:2023:i:2:p:545-563
    DOI: 10.1016/j.jce.2023.01.005
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    More about this item

    Keywords

    The human capital; Wages; Experience; Wage–experience profile; Russia;
    All these keywords.

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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