Employment Protection Legislation in Russia: Regional Enforcement and Labour Market Outcomes

The efficiency of the labour market critically depends on the design of its institutions with employment protection legislation (EPL) playing a special role here. However, since formal laws can be observed or ignored to varying degrees, the actual enforcement regime shapes incentives and constraints. Most of the studies exploring EPL effects on labour market performance implicitly assume that EPL compliance is near to complete and therefore all firms bear full adjustment costs incurred by the regulations. This seems to be a very strong assumption for any country but it sounds especially strong and hardly plausible for developing and transition economies. But if compliance and enforcement varies widely across regions/cities or segments of firms, then this variation is likely to cause variation in performance. This paper looks at Russia in particular. The main idea of this paper is to reveal and describe cross-regional and inter-temporal variation in EPL enforcement and to explore empirically whether it is translated into regional labour market outcomes. The paper employs unique data set based on the State Labour Inspectorate data and the Supreme court statistics on labour disputes.