Over-employment, labour immobility, distress work and firm start-ups: four economic themes of Russia's slow transition to the market (BL)

In this thesis we explore several areas of labour market and firm performance in Russia during the 1990s. Chapter 1 focuses on how much unemployment is needed for restructuring the Russian economy. We find that through the mid-1990s, the adjustment of the Russian labour market to macroeconomic shocks differed significantly from the pattern observed in early reforming transition economies. Although the output collapse in Russia was considerably greater, employment remained much higher. The main explanation for slow labour shedding was ultra-flexible real wages and low unemployment benefit.Chapter 2 attempts to research whether the reallocation of labour taking place in Russia is efficient. Using 1996 data from the Russia Longitudinal Monitoring Survey (RLMS), a household-based survey of the Russian people, we find that individuals who changed jobs experienced significantly faster wage growth than did those who did not change jobs. Counterfactual analysis that controls for sample selection bias shows that job-changers had faster wage growth than would otherwise have been the case for these individuals. This appears to suggest that the move to new employment was efficient. Finally, we assess the responsiveness of workers to perceived wage differentials. We find that the wage elasticity of job change in Russia is positive yet small, indicating the presence of potentially serious constraints on job mobility.Chapter 3 analyses the labour supply of Russian women. We find that although female economic activity had declined in the 1990s, it was still higher than in other transition economies. Our analysis of 1995-96 data from the RMLS indicates that as the wage rises, labour force participation falls. Similarly, the number of hours worked by women in employment falls as the wage rate increases. In both cases, the income effect dominates the substitution effect. We see this as evidence of a "distress" condition in the Russian labour market, where in order to make ends meet, women have to step up their economic activity when the wage falls.In Chapter 4 we research whether Russian de novo (start-up) firms behave differently, and perform better, than their privatised and state counterparts. We analyse data collected by a 1994 World Bank survey of 453 manufacturing firms in Russia. Using econometric techniques that allow us to control for enterprise size, industrial sector and location, we compare firms of different ownership types across a range of economic performance indicators. Our results clearly show that Russian de novo firms were significantly more successful than privatised or state-owned enterprises.