Labor Market Uncertainty and Private Sector Labor Supply in Russia
The development of a vibrant private sector has been one of the key failures of the transitional period of Russia. This paper develops a theoretical and empirical model of individual labor supply behavior under uncertainty, and estimates this model using data from the Russian Longitudinal Monitoring Survey for the years 1994-1996 and 1998. As hypothesized, a decrease in private sector earnings variability is estimated to increase the likelihood of private sector employment for individuals with constrained consumption smoothing ability. Evidence of ex-ante intra-household risk sharing is also found with individuals reducing their exposure to uncertainty by diversifying the portfolio of jobs held by their household.
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