Labor Supply in Russia: Studying the Role of Outside Options of the Employed

Based on the panel data of the Russian Longitudinal Monitoring Survey (RLMS) for years 1994–2000 the factors determining men's and women's labor supply at the primary job have been identified. A theoretical model of labor supply for two-sector economy (primary job sector and moonlighting sector) is proposed. The two sectors are heterogeneous at hourly wage rates and at the volume of social benefits and privileges. It is shown theoretically that the moonlighting wage rate is a negative factor for labor supply at the primary job; it is true not only for moonlighters but also for those who are employed at a single job in the primary employment sector. This result is confirmed econometrically for men but not for women. It is also shown that the wage rate and social benefits at the primary job are positive factors for men's and women's labor supply at the primary job, while the State ownership is a negative factor of their labor supply.