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Attaching Workers through In-Kind Payments: Theory and Evidence from Russia

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  • Guido Friebel

    (Goethe University Frankfurt)

  • Sergei Guriev

Abstract

External shocks may cause a decline in the productivity of fixed capital in certain regions of an economy. Exogenous obstacles to migration make it hard for workers in those regions to reallocate to more prosperous regions. In addition, firms may devise “attachment” strategies to keep workers from moving out of a local labor market. When workers are compensated in kind, they find it difficult to raise the cash needed for migration. This endogenous obstacle to migration has not yet been considered in the literature. The article shows that the feasibility of attachment depends on the inherited structure of local labor markets: attachment can exist in equilibrium only if the labor market is sufficiently concentrated. Attachment is beneficial for both employers and employees but hurts the unemployed and the self-employed. An analysis of matched household-firm data from the Russian Federation corroborates the theory.

Suggested Citation

  • Guido Friebel & Sergei Guriev, 2005. "Attaching Workers through In-Kind Payments: Theory and Evidence from Russia," Sciences Po publications info:hdl:2441/5q3gpbfo7i8, Sciences Po.
  • Handle: RePEc:spo:wpmain:info:hdl:2441/5q3gpbfo7i87lpv8gubeo44app
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    Citations

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    Cited by:

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    3. Kseniya Abanokova & Michael Lokshin, 2015. "Changes in household composition as a shock-mitigating strategy," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 23(2), pages 371-388, April.
    4. International Monetary Fund, 2006. "Russian Federation; Selected Issues," IMF Staff Country Reports 06/430, International Monetary Fund.
    5. repec:ebd:wpaper:144 is not listed on IDEAS
    6. World Bank, 2011. "Russia : Reshaping Economic Geography," World Bank Other Operational Studies 13052, The World Bank.
    7. Danzer, Alexander M. & Danzer, Natalia, 2011. "The Long-Term Effects of the Chernobyl Catastrophe on Subjective Well-Being and Mental Health," IZA Discussion Papers 5906, Institute of Labor Economics (IZA).
    8. Danzer, Natalia, 2019. "Job satisfaction and self-selection into the public or private sector: Evidence from a natural experiment," Labour Economics, Elsevier, vol. 57(C), pages 46-62.
    9. Tuuli Juurikkala & Olga Lazareva, 2006. "Non-wage benefits, costs of turnover, and labor attachment: evidence from Russian firms," Working Papers w0062, Center for Economic and Financial Research (CEFIR).
    10. Haaparanta, Pertti & Juurikkala, Tuuli, 2007. "Bribes and local fiscal autonomy in Russia," BOFIT Discussion Papers 12/2007, Bank of Finland, Institute for Economies in Transition.
    11. Simon COMMANDER & Natalia ISACHENKOVA & Yulia RODIONOVA, 2013. "Informal employment dynamics in Ukraine: An analytical model of informality in transition economies," International Labour Review, International Labour Organization, vol. 152(3-4), pages 445-467, December.

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    More about this item

    JEL classification:

    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
    • M42 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Auditing
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • P31 - Economic Systems - - Socialist Institutions and Their Transitions - - - Socialist Enterprises and Their Transitions

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