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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.

Suggested Citation

  • Shakhnovich Ruvim & Yudashkina Galina, 2001. "Wage-Setting and Employment Behavior of Enterprises during the Period of Economic Transition," EERC Working Paper Series 01-04e, EERC Research Network, Russia and CIS.
  • Handle: RePEc:eer:wpalle:01-04e

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    References listed on IDEAS

    1. 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.
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    Cited by:

    1. Gimpelson, V. & Kapeliushnikov, R. & Lukyanova, A. & Ryzhikova, Z. & Kulyaeva, G., 2010. "Ownership and Wage Differentiation in Russia," Journal of the New Economic Association, New Economic Association, issue 5, pages 48-72.
    2. J. David Brown & John S. Earle, "undated". "The Reallocation of Workers and Jobs in Russian Industry: New Evidence on Measures and Determinants," Upjohn Working Papers and Journal Articles jse20031, W.E. Upjohn Institute for Employment Research.
    3. Maxim Bouev, 2005. "State Regulations, Job Search and Wage Bargaining: A Study in the Economics of the Informal Sector," William Davidson Institute Working Papers Series wp764, William Davidson Institute at the University of Michigan.
    4. R. Kapelyushnikov., 2004. "Wage-setting Mechanisms in the Russian Industry," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 4.
    5. J. David Brown & John S. Earle, 2003. "The reallocation of workers and jobs in Russian industry," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 11(2), pages 221-252, June.

    More about this item


    Russia; enterprise behavior; wage; employment; transition; panel data;

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J53 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Labor-Management Relations; Industrial Jurisprudence
    • P31 - Economic Systems - - Socialist Institutions and Their Transitions - - - Socialist Enterprises and Their Transitions

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