Riding the Transition Roller-Coaster: Flexibility and the Inter-Industry Wage Structure in Russia

This paper examines the changes in the inter-industry wage structure experienced by Russia since 1993, as part of its transition from a plan-based economy to a more \market oriented" structure. Using two Russian household panel data sets, the RLMS and the RUSSET, we _nd that since the transformation process began, the dispersion of inter-industry wage structure has increased. Moreover, Russia exhibits large movements in wage premia, as industries respond to massively changing demand conditions. The issue of wage arrears (unpaid wages or outstanding pay), which a_ects half of all employees, plays an important role in the determination of wages. Studies, which do not account for wage arrears, overestimate the overall inter-industry wage dispersion. Despite movements towards a privatized market economy, we still _nd government ownership and Soviet network e_ects play an important role in determining the wage structure.