Wage Arrears and the Distribution of Earnings in Russia

43 Pages Posted: 18 Dec 2001

See all articles by Hartmut Lehmann

Hartmut Lehmann

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

Jonathan Wadsworth

London School of Economics & Political Science (LSE) - Centre for Economic Performance (CEP); IZA Institute of Labor Economics; William Davidson Institute; Royal Holloway College University of London

Date Written: December 2001

Abstract

The increase in wage inequality in Russia during its transition process has far exceeded the increase in wage dispersion observed in other European countries undergoing transition. Russia also has an extremely large incidence of wage arrears. We analyze to what extent wage arrears affect the wage distribution and measures of wage inequality in Russia. We present counterfactual distributions, derived from a variety of different methods, which suggest that conventional measures of earnings dispersion would be some 20 to 30 per cent lower in the absence of arrears. We then go on to show how wage gaps at various points in the pay distribution across gender, education, region and industry are influenced by a failure to allow for wage arrears. Using our counterfactual estimates we show, for example, that the median gender wage gap would be around twenty-five points higher than the actual gap that we observe. Similarly, the counterfactual ratio of mean graduate pay to mean pay of those with primary education is around twenty points lower than observed. We show that the parameters of the counterfactual wage distributions are very similar to the parameters of the observed wage distributions of those not in arrears. This means that for those wishing to study aspects of wage differentials and inequality in Russia, it may be feasible to use the subset of those not in arrears and still get close to the true population parameters.

Keywords: Wage Arrears, Earnings Inequality, Counterfactuals, Transition Economies

JEL Classification: J6

Suggested Citation

Lehmann, Hartmut F. and Wadsworth, Jonathan, Wage Arrears and the Distribution of Earnings in Russia (December 2001). IZA Discussion Paper No. 410; William Davidson Institute Working Paper No. 421. Available at SSRN: https://ssrn.com/abstract=294432

Hartmut F. Lehmann (Contact Author)

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

Jonathan Wadsworth

London School of Economics & Political Science (LSE) - Centre for Economic Performance (CEP) ( email )

Houghton Street
London WC2A 2AE
England

IZA Institute of Labor Economics

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

William Davidson Institute

724 E. University Ave.
Wyly Hall
Ann Arbor, MI 48109-1234
United States

Royal Holloway College University of London

Senate House
Malet Street
London, TW20 0EX
United Kingdom

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