IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Adjustment Costs of Trade Liberalization: Estimations for the Russian Labor Market

Listed author(s):
  • Akhmed Akhmedov



  • Evgenia Bessonova



  • Ivan Cherkashin

    (Penn State University)

  • Irina Denisova


    (CEFIR/New Economic School)

  • Elena Grishina

    (Moscow Urban Institute)

The paper investigates adjustment costs of trade liberalization in Russia by estimating the influence of tariff policy in the 90-ies on the level and volatility of employment and wages. In particular, we study the labor demand and labor supply channels and address the following issues. First, how does labor demand by firms respond to trade shocks? Second, what is the effect of trade developments on wage dispersion across sectors? Third, what is the effect of trade changes on the wage gap between skilled and unskilled workers? We use balance sheets of Russian large and medium enterprises for 1995-2001 to estimate labor demand equations and to calculate possible changes in employment due to various shocks in output and tariffs. Our sample comprises of more than 53 thousand enterprises and is nationally and industry-level representative. The analysis of the labor supply channel is based on Russian Longitudinal Monitoring Survey (RLMS), years 1995-2002, matched with sectoral indicators of trade liberalization. RLMS is a nationally representative panel survey of households’ members on a large number of issues. We find low magnitudes of responsiveness of the labor demand to trade shocks, both through the indirect effect of output changes and directly through the influence of tariffs and import penetration. This suggests that the adjustment costs to expected trade liberalization in the form of changes in industrial labor demand should not be high. We also find that trade liberalization does not have a significant effect on wages. It is likely that tariff reduction and trade liberalization would lead to only slight increase in the wage differentials between skilled and unskilled labor. It is obtained that there is no significant effect of tariffs on wages and wage premiums. Therefore, no significant evidence for the claim that “workers in more protected industries earn relatively more” is found. The latter implies that workers would not lose much after further trade liberalization provided they could move to trade exposed industries. The increase in tariff levels is likely to be associated with the increase in wage gap between skilled and unskilled labor. But the evidence for this conclusion is not very strong, because the industry affiliation does not explain much of the wage variation between skilled and unskilled workers. Overall, the adjustment costs of anticipated trade liberalization are likely to be much smaller than expected as the analysis of the influence of previous trade shocks on the Russian economy shows.

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:
Download Restriction: no

Paper provided by Center for Economic and Financial Research (CEFIR) in its series Working Papers with number w0086.

in new window

Length: 24 pages
Date of creation: Apr 2005
Handle: RePEc:cfr:cefirw:w0086
Contact details of provider: Postal:
117418 Russia, Moscow, Nakhimovsky pr., 47, office 720

Phone: +7 (495) 105 50 02
Fax: +7 (495) 105 50 03
Web page:

More information through EDIRC

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.:

in new window

  1. Brown, J. David & Earle, John S., 2002. "Gross Job Flows in Russian Industry Before and After Reforms: Has Destruction Become More Creative?," Journal of Comparative Economics, Elsevier, vol. 30(1), pages 96-133, March.
  2. Pinelopi K. Goldberg & Nina Pavcnik, 2001. "Trade Protection and Wages: Evidence from the Colombian Trade Reforms," NBER Working Papers 8575, National Bureau of Economic Research, Inc.
  3. Cragg, Michael Ian & Epelbaum, Mario, 1996. "Why has wage dispersion grown in Mexico? Is it the incidence of reforms or the growing demand for skills?," Journal of Development Economics, Elsevier, vol. 51(1), pages 99-116, October.
Full references (including those not matched with items on IDEAS)

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

When requesting a correction, please mention this item's handle: RePEc:cfr:cefirw:w0086. 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: (Julia Babich)

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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.