Attaching Workers through In-Kind Payments : Theory and Evidence from Russia
External shocks may cause a decline in the productivity of fixed capital in certain regions of an economy. Exogenous obstacles to migration make it hard for workers in those regions to reallocate to more prosperous regions. In addition, firms may d...
| Main Authors: | , |
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| Format: | Journal Article |
| Language: | English en_US |
| Published: |
Published by Oxford University Press on behalf of the World Bank
2014
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2005/05/17747612/attaching-workers-through-in-kind-payments-theory-evidence-russia http://hdl.handle.net/10986/16475 |
| Summary: | External shocks may cause a decline in
the productivity of fixed capital in certain regions of an
economy. Exogenous obstacles to migration make it hard for
workers in those regions to reallocate to more prosperous
regions. In addition, 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. This endogenous obstacle to
migration has not yet been considered in the literature. The
article shows 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. Attachment is beneficial for both
employers and employees but hurts the unemployed and the
self-employed. An analysis of matched household-firm data
from the Russian Federation corroborates the theory. |
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