Title

Wage Determination in Urban Russia: Underpayment and the Gender Differential

Document Type

Article

Publication Date

2005

Publication Title

Economic Systems

DOI

10.1016/j.ecosys.2005.05.002

Abstract

A stochastic frontier wage equation is employed to examine labor-market efficiency and estimate workers’ potential wages in Russia after a decade of economic reforms using a nationally representative household survey. Dynamic monopsony underpayment, defined as the differences between the highest wage a worker with given characteristics could earn and the worker's actual wage, is a significant factor lowering real wages. The estimated degree of underpayment differs significantly depending on gender and substantially exceeds the estimates for Western economies. Workers’ potential wages are elastic with respect to the local cost of living. Women's mean potential wage is only 58% of men's.