Wage Policies of a Russian Firm and the Financial Crisis of 1998: Evidence from Personnel Data - 1997 to 2002

51 Pages Posted: 12 Jun 2008

See all articles by Thomas J. Dohmen

Thomas J. Dohmen

Institute for the Study of Labor (IZA); Maastricht University - Business Investment Research Center (BIRC)

Hartmut Lehmann

University of Bologna - School of Economics, Management, and Statistics; IZA Institute of Labor Economics

Mark E. Schaffer

Heriot-Watt University - Centre for Economic Reform and Transformation; Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

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Date Written: May 2008

Abstract

We use a rich personnel data set from a Russian firm for the years 1997 to 2002 to analyze how the financial crisis in 1998 and the resulting change in external labour market conditions affect the wages and the welfare of workers inside a firm. We provide evidence that large shocks to external conditions affect the firm's personnel policies, and show that the burden of the shock is not evenly spread across the workforce. The firm takes advantage of a high-inflationary environment and of a fall in workers' outside options after the financial crisis and cuts real wages. Earnings are curbed most for those who earned the highest rents, resulting in a strong compression of real wages. The fact that real wages and real compensation levels never recovered to pre-crisis levels even though the firm's financial situation was better in 2002 than before the crisis and the differential treatment of employee groups within the firm can be taken as evidence that market forces strongly influence the wage policies of our firm.

Keywords: firm-level wage setting, Internal labour markets, personnel data, Russia

JEL Classification: J23, J31, P23

Suggested Citation

Dohmen, Thomas and Lehmann, Hartmut F. and Schaffer, Mark E., Wage Policies of a Russian Firm and the Financial Crisis of 1998: Evidence from Personnel Data - 1997 to 2002 (May 2008). , Vol. , pp. -, 2008. Available at SSRN: https://ssrn.com/abstract=1143207

Thomas Dohmen (Contact Author)

Institute for the Study of Labor (IZA) ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Maastricht University - Business Investment Research Center (BIRC) ( email )

P.O. Box 616
Maastricht, 6200 MD
Netherlands
+31-43-388 3832 (Phone)
+31-43-388 4856 (Fax)

Hartmut F. Lehmann

University of Bologna - School of Economics, Management, and Statistics ( email )

Piazza Scaravilli 1
40126 Bologna, fc 47100
Italy

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Mark E. Schaffer

Heriot-Watt University - Centre for Economic Reform and Transformation ( email )

School of Management - Department of Economics
Edinburgh EH14 4AS
United Kingdom
+44 131 451 3494 (Phone)
+44 131 451 3008 (Fax)

HOME PAGE: http://www.hw.ac.uk/ecoWWW/cert

Centre for Economic Policy Research (CEPR)

London
United Kingdom

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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