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Wage-Setting and Employment Behavior of Enterprises during the Period of Economic Transition

  • Shakhnovich Ruvim

    ()

  • Yudashkina Galina

    ()

Based on the dynamic labor demand model, we investigate wage-setting and employment behavior of enterprises during the period of transition. Using panel data on large-sized and medium-sized enterprises in the Novosibirsk region (1993–1998), we make an effort to identify the type of enterprises' behavior and to determine specific factors that affect it. We found that the type of behavior exhibited by these enterprises corresponds to the "right to manage" model's prediction, i.e., the contract curve coincides with the labor demand curve. We also found that wage-setting and employment behavior of enterprises was influenced by the dominant group of owners during the first period of transition (1994–1996). According to our analysis, workers appropriate some of the enterprise-specific rents in their wages, and the amount of this rent decreases if managers are the dominant group of owners.

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Paper provided by EERC Research Network, Russia and CIS in its series EERC Working Paper Series with number 01-04e.

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Length: 74 pages
Date of creation: 09 Nov 2001
Date of revision:
Handle: RePEc:eer:wpalle:01-04e
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  1. Nickell, Stephen J & Wadhwani, Sushil, 1990. "Insider Forces and Wage Determination," Economic Journal, Royal Economic Society, vol. 100(401), pages 496-509, June.
  2. Svejnar, J., 1984. "Bargaining power, fear of disagreement and wage settlements: theory and evidence from U.S. industry," CORE Discussion Papers 1984037, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. Sargent, Thomas J, 1978. "Estimation of Dynamic Labor Demand Schedules under Rational Expectations," Journal of Political Economy, University of Chicago Press, vol. 86(6), pages 1009-44, December.
  4. Eberts, Randall W & Stone, Joe A, 1986. "On the Contract Curve: A Test of Alternative Models of Collective Bargaining," Journal of Labor Economics, University of Chicago Press, vol. 4(1), pages 66-81, January.
  5. Nickell, S & Vainiomaki, J & Wadhwani, S, 1994. "Wages and Product Market Power," Economica, London School of Economics and Political Science, vol. 61(244), pages 457-73, November.
  6. MaCurdy, Thomas E & Pencavel, John H, 1986. "Testing between Competing Models of Wage and Employment Determination in Unionized Markets," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages S3-S39, June.
  7. 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).
  8. A Aquisti & H Lehmann & Jonathan Wadsworth, 1998. "Grime and Punishment: Job Insecurity and Wage Arrears in the Russian Federation," CEP Discussion Papers dp0403, Centre for Economic Performance, LSE.
  9. McDonald, Ian M & Solow, Robert M, 1981. "Wage Bargaining and Employment," American Economic Review, American Economic Association, vol. 71(5), pages 896-908, December.
  10. Prasnikar, Janez, et al, 1994. "Behavior of Participatory Firms in Yugoslavia: Lessons for Transforming Economies," The Review of Economics and Statistics, MIT Press, vol. 76(4), pages 728-41, November.
  11. Stephen Nickell & Sushil Wadhwani, 1991. "Employment Determination in British Industry: Investigations Using Micro-Data," Review of Economic Studies, Oxford University Press, vol. 58(5), pages 955-969.
  12. Hamermesh, Daniel S, 1989. "Labor Demand and the Structure of Adjustment Costs," American Economic Review, American Economic Association, vol. 79(4), pages 674-89, September.
  13. Estrin Saul & Svejnar Jan, 1993. "Wage Determination in Labor-Managed Firms under Market-Oriented Reforms: Estimates of Static and Dynamic Models," Journal of Comparative Economics, Elsevier, vol. 17(3), pages 687-700, September.
  14. Andrei Shleifer & Robert W. Vishny, 1994. "Politicians and Firms," The Quarterly Journal of Economics, Oxford University Press, vol. 109(4), pages 995-1025.
  15. Stephen Nickell & Sushil Wadhwani, 1991. "Employment Determination in British Industry: Investigations Using Micro-Data," Review of Economic Studies, Oxford University Press, vol. 58(5), pages 955-969.
  16. Daniel S. Hamermesh, 1976. "Econometric Studies of Labor Demand and Their Application to Policy Analysis," Journal of Human Resources, University of Wisconsin Press, vol. 11(4), pages 507-525.
  17. David G. Blanchflower & Andrew J. Oswald, 1995. "An Introduction to the Wage Curve," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 153-167, Summer.
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