Dynamism and Inertia on the Russian Labour Market. A Segmentation Model.

This paper proposes an explanation of the puzzling coexistence of elements of inertia and dynamism on the Russian labour market using a segmentation model. Risl averse workers are differentiated according to their productivity. They face a trade-off between wages and access to social services provided by firms. The most productive workers leave their initial firm, contract on the spot labour market, and concentrate in the best performing firms. The model provides a possible interpretation of wage arrears which can be viewed as an element of an implicit contract between firms and less productive workers. We verify the predictions of the model using a panel dataset containing 13 628 firms, for 1992-1997.