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Attaching Workers Through In-kind Payments: Theory and Evidence from Russia

Author

Listed:
  • Guido Friebel

    (University of Toulouse (EHESS and IDEI), CEPR, IZA)

  • Sergei Guriev

    (New Economic School/CEFIR and CEPR)

Abstract
As a result of external shocks, the productivity of fixed capital may sometimes decrease in certain regions of an economy. There are exogenous obstacles to migration that make it hard for workers to reallocate to more profitable regions. We point to an endogenous obstacle that has not been considered before. 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. We show, first, 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. Second, attachment is beneficial for both employers and employed workers, but it hurts unemployed and self-employed. An analysis of matched household-firm data from Russia corroborates our theory.

Suggested Citation

  • Guido Friebel & Sergei Guriev, 2005. "Attaching Workers Through In-kind Payments: Theory and Evidence from Russia," Working Papers w0057, Center for Economic and Financial Research (CEFIR).
    • Handle: RePEc:cfr:cefirw:w0057
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Sergei Guriev & Andrei Rachinsky, 2006. "The Evolution of Personal Wealth in the Former Soviet Union and Central and Eastern Europe," WIDER Working Paper Series RP2006-120, World Institute for Development Economic Research (UNU-WIDER).
    2. 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).
    3. Tuuli Juurikkala & Olga Lazareva, 2006. "Lobbying at the local level: social assets in Russian firms," Working Papers w0061, Center for Economic and Financial Research (CEFIR).
    4. Tuuli Juurikkala & Olga Lazareva, 2012. "Non‐wage benefits, costs of turnover and labour attachment," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 20(1), pages 113-136, January.
    5. 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.
    6. Haaparanta, Pertti & Juurikkala, Tuuli, 2007. "Bribes and local fiscal autonomy in Russia," BOFIT Discussion Papers 12/2007, Bank of Finland Institute for Emerging Economies (BOFIT).
    7. International Monetary Fund, 2006. "Russian Federation; Selected Issues," IMF Staff Country Reports 06/430, International Monetary Fund.
    8. Helena Schweiger & Guido Friebel, 2013. "Management Quality, Ownership, Firm Performance and Market Pressure in Russia," Open Economies Review, Springer, vol. 24(4), pages 763-788, September.
    9. 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.
    10. Guido Friebel & Helena Schweiger, 2012. "Management quality, firm performance and market pressure in Russia," Working Papers 144, European Bank for Reconstruction and Development, Office of the Chief Economist.
    11. Juurikkala, Tuuli & Lazareva, Olga, 2006. "Lobbying at the local level: social assets in Russian firms," BOFIT Discussion Papers 1/2006, Bank of Finland Institute for Emerging Economies (BOFIT).
    12. World Bank, 2011. "Russia : Reshaping Economic Geography," World Bank Publications - Reports 13052, The World Bank Group.
    13. repec:zbw:bofitp:2007_012 is not listed on IDEAS
    14. repec:zbw:bofitp:2006_004 is not listed on IDEAS
    15. 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.
    16. 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.
    17. 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).
    18. Juurikkala, Tuuli & Lazareva, Olga, 2006. "Non-wage benefits, costs turnover, and labor attachment: evidence from Russian firms," BOFIT Discussion Papers 4/2006, Bank of Finland Institute for Emerging Economies (BOFIT).

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    More about this item

    Keywords

    Labor market competition; Transition; Russia; Labor tying;
    All these keywords.

    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 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Socialist Enterprises and Their Transitions

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