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How Late to Pay? Understanding Wage Arrears in Russia

We organize an empirical analysis of Russian wage arrears around hypotheses concerning factors that create incentives for firms to pay late and for workers to tolerate late payment, both reinforced by a prevalent environment of overdue wages. Our analysis draws upon nationally representative household panel data matched with employer data to show substantial interfirm variation with the probability of arrears positively related to firm age, size, state ownership, and declining performance. Estimation of a constrained multinomial logit model also reveals intrafirm variation related to job tenure and small shareholdings in the firm. Workers tend to have higher arrears in rural regions with low hiring rates, concentrated labor markets, and more prevalent arrears in the past. We argue that wage arrears, unlike wage cuts, have a theoretically ambiguous effect on workers' quit behavior, and we show empirically that the effect varies negatively with the extent of the practice in the local labor market.

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Paper provided by W.E. Upjohn Institute for Employment Research in its series Upjohn Working Papers and Journal Articles with number jse20023.

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Handle: RePEc:upj:weupjo:jse20023
Note: Appears in Journal of Labor Economics 20(3): 661-707
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  1. Lazear, Edward P, 1981. "Agency, Earnings Profiles, Productivity, and Hours Restrictions," American Economic Review, American Economic Association, vol. 71(4), pages 606-20, September.
  2. George A. Akerlof & Lawrence F. Katz, 1988. "Workers' Trust Funds and the Logic of Wage Profiles," NBER Working Papers 2548, National Bureau of Economic Research, Inc.
  3. Pencavel, John H, 1972. "Wages, Specific Training, and Labor Turnover in US Manufacturing Industries," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 13(1), pages 53-64, February.
  4. Salop, Joanne & Salop, Steven, 1976. "Self-Selection and Turnover in the Labor Market," The Quarterly Journal of Economics, MIT Press, vol. 90(4), pages 619-27, November.
  5. Topel, Robert H & Ward, Michael P, 1992. "Job Mobility and the Careers of Young Men," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 439-79, May.
  6. Topel, Robert H, 1991. "Specific Capital, Mobility, and Wages: Wages Rise with Job Seniority," Journal of Political Economy, University of Chicago Press, vol. 99(1), pages 145-76, February.
  7. Flinn, Christopher J, 1986. "Wages and Job Mobility of Young Workers," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages S88-S110, June.
  8. Hartmut Lehmann & Jonathan Wadsworth & Alessandro Acquisti, 1999. "Grime and Punishment: Job Insecurity and Wage Arrears in the Russian Federation," CERT Discussion Papers 9907, Centre for Economic Reform and Transformation, Heriot Watt University.
  9. McCue, Kristin, 1996. "Promotions and Wage Growth," Journal of Labor Economics, University of Chicago Press, vol. 14(2), pages 175-209, April.
  10. Richard Layard & Ansgar Richter, 1995. "How Much Unemployment is Needed for Restructuring?: The Russian Experience," CEP Discussion Papers dp0238, Centre for Economic Performance, LSE.
  11. Joanne Salop & Steve Salop, 1976. "Self-selection and turnover in the labor market," Special Studies Papers 80, Board of Governors of the Federal Reserve System (U.S.).
  12. Brainerd, Elizabeth, 1998. "Winners and Losers in Russia's Economic Transition," American Economic Review, American Economic Association, vol. 88(5), pages 1094-1116, December.
  13. G. Alfandari & M.E. Schaffer, 1996. ""Arrears" in the Russian Enterprise Sector," CERT Discussion Papers 9608, Centre for Economic Reform and Transformation, Heriot Watt University.
  14. Brown, James N & Light, Audrey, 1992. "Interpreting Panel Data on Job Tenure," Journal of Labor Economics, University of Chicago Press, vol. 10(3), pages 219-57, July.
  15. 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).
  16. Beth Mitchneck & David A. Plane, 1995. "Migration and the Quasi-labor Market in Russia," International Regional Science Review, , vol. 18(3), pages 267-288, July.
  17. Kornai, Janos, 1992. "The Socialist System: The Political Economy of Communism," OUP Catalogue, Oxford University Press, number 9780198287766.
  18. David, Paul A, 1985. "Clio and the Economics of QWERTY," American Economic Review, American Economic Association, vol. 75(2), pages 332-37, May.
  19. repec:cup:cbooks:9780521332958 is not listed on IDEAS
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