Community Norms and Organizational Practices: The Legitimization of Wage Arrears in Russia, 1992-1999

50 Pages Posted: 18 Feb 2004

See all articles by John S. Earle

John S. Earle

George Mason University - Schar School of Policy and Government; IZA Institute of Labor Economics

Andrew Spicer

University of California, Riverside (UCR) - A. Gary Anderson Graduate School of Management

Klara Sabirianova Peter

University of North Carolina - Chapel Hill; IZA Institute of Labor Economics; Centre for Economic Policy Research (CEPR)

Date Written: February 2004

Abstract

What role do community norms play in the diffusion and persistence of new organizational practices? We explore this question through an examination of the widespread practice of wage arrears, the late and non-payment of wages, in Russia during the 1990s. Existing research on wage arrears most often examines this practice as a means of flexible wage adjustment under difficult economic conditions. We develop an alternative theory that explains wage arrears through their acceptance as a legitimate form of organizational behavior within local communities. Our empirical analysis finds some support for the neoclassical position that wage arrears reflect adjustment to negative shocks, but this perspective fails to account for a number of important facts, including a high level of arrears among apparently successful firms. In contrast, our results find strong support for the institutional perspective. The statistical analysis demonstrates powerful and robust community effects both in firm adoption of this practice, controlling for firm performance, liquidity, and fixed firm effects, and in workers' reaction to arrears, through their quit (exit) and strike (voice) behavior.

Keywords: Institutions, norms, legitimacy, arrears, organizational practices, sociology, Russia

JEL Classification: A12, A14, B52, J30, L14, O17, P31, P37

Suggested Citation

Earle, John S. and Spicer, Andrew and Sabirianova Peter, Klara, Community Norms and Organizational Practices: The Legitimization of Wage Arrears in Russia, 1992-1999 (February 2004). Available at SSRN: https://ssrn.com/abstract=480648 or http://dx.doi.org/10.2139/ssrn.480648

John S. Earle (Contact Author)

George Mason University - Schar School of Policy and Government ( email )

3351 Fairfax Drive
MS 3B1
Arlington, VA 22201
United States
703-993-8023 (Phone)

HOME PAGE: http://earle.gmu.edu

IZA Institute of Labor Economics

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

Andrew Spicer

University of California, Riverside (UCR) - A. Gary Anderson Graduate School of Management ( email )

Riverside, CA 92521
United States

Klara Sabirianova Peter

University of North Carolina - Chapel Hill ( email )

Chapel Hill, NC 27599
United States

HOME PAGE: http://www.unc.edu/~kpeter

IZA Institute of Labor Economics

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

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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