Job Separations and Informality in theRussian Labor Market

In the years 2003-2008 the Russian economy experienced a period of strong and sustainedgrowth, which was accompanied by large worker turnover and rising informality. Weinvestigate whether the burden of informality falls disproportionately on job separators(displaced workers and quitters) in the Russian labor market in the form of informalemployment and undeclared wages in formal jobs. We also pursue the issues whetherdisplaced workers experience more involuntary informal employment than workers who quitand whether informal employment persists. We find a strong positive link betweenseparations and informal employment as well as shares of undeclared wages in formal jobs.Our results also show that displacement entraps some of the workers in involuntary informalemployment. Those who quit, in turn, experience voluntary informality for the most part, butthere seems a minority of quitting workers who end up in involuntary informal jobs. Thisscenario does not fall on all separators but predominantly on those with low human capital.Finally, informal employment is indeed persistent since separating from an informal jobconsiderably raises the probability to be informal in the subsequent job....