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Labor Earnings in One-Company Towns: Theory and Evidence from Kazakhstan

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  • Rama, Martin
  • Scott, Kinnon

Abstract

One-company towns, characterized by the presence of a large employer in a local labor market, are a frequent legacy of state-led development strategies. How will downsizing or closing unprofitable state-owned enterprises affect these towns? This article develops a simple model combining monopsony power in the labor market with a Keynesian closure of the product market and uses it to interpret the findings of previous studies. The article evaluates the impact of the company's employment level on the town's labor earnings in Kazakhstan, where one-company towns are still prevalent. The evaluation is based on data from the 1996 Living Standards Measurement Survey. The results show that labor earnings in the town decrease roughly 1.5 percent when the share of its population working for the company decreases 1 percent. The results are robust to changes in the definition of labor earnings and to the inclusion of a variety of other community characteristics in the analysis. These results and the theoretical model are combined to evaluate the welfare impact of company downsizing and, consequently, to derive the optimal extent of labor retrenchment. Copyright 1999 by Oxford University Press.

Suggested Citation

  • Rama, Martin & Scott, Kinnon, 1999. "Labor Earnings in One-Company Towns: Theory and Evidence from Kazakhstan," The World Bank Economic Review, World Bank, vol. 13(1), pages 185-209, January.
    • Handle: RePEc:oup:wbecrv:v:13:y:1999:i:1:p:185-209
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    Cited by:

    1. Simonetta Longhi & Peter Nijkamp & Jacques Poot, 2006. "Spatial Heterogeneity And The Wage Curve Revisited," Journal of Regional Science, Wiley Blackwell, vol. 46(4), pages 707-731, October.
    2. Guido Friebel & Sergei Guriev, 2005. "Attaching Workers through In-Kind Payments: Theory and Evidence from Russia," The World Bank Economic Review, World Bank, vol. 19(2), pages 175-202.
    3. Simon Commander, 2018. "One-company towns: Scale and consequences," IZA World of Labor, Institute of Labor Economics (IZA), pages 433-433, March.
    4. Boris Najman & Richard Pomfret & Gael Raballand & Patricia Sourdin, 2005. "How are Oil Revenues redistributed in an Oil Economy? The case of Kazakhstan," Development and Comp Systems 0512012, University Library of Munich, Germany.
    5. repec:hal:spmain:info:hdl:2441/5q3gpbfo7i87lpv8gubeo44app is not listed on IDEAS
    6. Martin Rama, 2002. "Globalization and Workers in Developing Countries," Economics Study Area Working Papers 41, East-West Center, Economics Study Area.
    7. World Bank, 2002. "Pacific Islands - Regional Economic Report : Embarking on a Global Voyage - Trade Liberalization and Complementary Reforms in the Pacific," World Bank Publications - Reports 15362, The World Bank Group.
    8. Arabsheibani, Reza & Mussurov, Altay, 2006. "Returns to Schooling in Kazakhstan: OLS and Instrumental Variables Approach," IZA Discussion Papers 2462, Institute of Labor Economics (IZA).
    9. Guido Friebel & Sergei Guriev, 2005. "Attaching Workers through In-Kind Payments: Theory and Evidence from Russia," The World Bank Economic Review, World Bank Group, vol. 19(2), pages 175-202.
    10. Hoekman & Bernard & Winters, L. Alan, 2005. "Trade and employment : stylized facts and research findings," Policy Research Working Paper Series 3676, The World Bank.
    11. Alberto Chong & Florencio de, 2003. "The Truth about Privatization in Latin America," Yale School of Management Working Papers ysm436, Yale School of Management.
    12. L. ALAN WINTERS & NEIL McCULLOCH & ANDREW McKAY, 2015. "Trade Liberalization and Poverty: The Evidence So Far," World Scientific Book Chapters, in: Non-Tariff Barriers, Regionalism and Poverty Essays in Applied International Trade Analysis, chapter 14, pages 271-314, World Scientific Publishing Co. Pte. Ltd..
    13. Hoffman, Joan, 2008. "Watershed shift: Collaboration and employers in the New York City Catskill/Delaware Watershed from 1990-2003," Ecological Economics, Elsevier, vol. 68(1-2), pages 141-161, December.
    14. Commander, Simon & Nikoloski, Zlatko & Plekhanov, Alexander, 2011. "Employment Concentration and Resource Allocation: One-Company Towns in Russia," IZA Discussion Papers 6034, Institute of Labor Economics (IZA).

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