Working Paper: CEPR ID: DP2368
Authors: Guido Friebel; Sergei Guriev
Abstract: We relate the phenomena of sluggish interregional labour reallocation and inkind compensation in Russia to ‘attachment’ strategies of firms: paying wages in non-monetary forms makes it hard for workers to raise the cash needed for quitting their region in order to find better jobs in more prosperous regions. While attachment may facilitate worker-specific investments that do not pay off if workers are expected to leave, it also eliminates workers’ outside options. Hence, firms may use it to exploit workers. Surprisingly, exploitation through attachment does not only occur in monopsonistic regional labour markets. Even if there is some competition, all firms in a region may use attachment strategies. Here, workers are locked-in and do not receive any compensation for their forgone option to move. Data of the Russian Longitudinal Monitoring Survey (RLMS) support our theory. Workers who receive in-kind payments are less likely to move than workers who do receive their wages in cash.
Keywords: transition; labour mobility; enterprise restructuring; lock-in of workers
JEL Codes: B31; D23; J41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| in-kind payments (J33) | worker attachment (J68) |
| worker attachment (J68) | reduced mobility (J62) |
| in-kind payments (J33) | reduced mobility (J62) |