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Informal Employment in Russia: Definitions, Incidence, Determinants and Labour Market Segmentation

Author

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  • Hartmut Lehmann

    (University of Bologna)

  • Anzelika Zaiceva

    (University of Modena)

Abstract

This paper takes stock of informal employment in Russia analysing its incidence and determinants. Using the regular 2003-11 waves and an informality supplement of the Russian Longitudinal Monitoring Survey (RLMS) it develops several measures of informal employment and demonstrates that the incidence varies widely across the different definitions. We also show that the determinants of informal employment are roughly stable across the different measures: workers who are males, relatively young, unskilled and employed in construction and trade and related services have a higher likelihood to have an informal job. We also take a look at the issue of labour market segmentation along the informal-formal divide by estimating an informal-formal wage gap at the means and across the entire wage distributions. We find only weak evidence for labour market segmentation in Russia when estimating an informal-formal wage gap for salaried workers at the mean. The results of quantile regressions show a wage penalty in the lower half of the distribution and no gap in the upper half for informal employees. In contrast, informal self-employed and entrepreneurs have conditional mean wages that are higher than the mean wages for the formally employed. Across the entire wage distribution, however, we find a negative wage gap in the lowest quartile and a strongly positive wage gap in the highest quartile, pointing to a segmented informal sector with a lower free entry tier and an upper rationed tier. This Working Paper relates to the 2014 OECD Economic Survey of the Russian Federation (www.oecd.org/eco/surveys/russia). L'emploi informel en Russie : Définitions, incidence, déterminants et segmentation du marché du travail Ce document de travail propose un bilan sur l'emploi informel en Russie et analyse son incidence et ses déterminants. En utilisant les données régulières 2003-11 et un supplément sur l'informalité de l'Enquête "Russian Longitudinal Monitoring Survey" (RLMS), nous suggérons plusieurs mesures de l'emploi informel et démontrons que l'incidence varie considérablement selon les différentes définitions. Nous montrons également que les déterminants de l'emploi informel sont à peu près stables avec les différentes mesures: les travailleurs hommes, relativement jeunes, non qualifiés et employés dans la construction et le commerce et les services connexes ont une probabilité plus élevée d'avoir un emploi informel. Nous examinons également la question de la segmentation du marché du travail en terme de division entre marché formel et informel en estimant l'écart de salaire entre secteurs en moyenne et sur l'ensemble de la distribution des salaires. Nous ne trouvons que de faibles signes de segmentation du marché du travail en Russie pour l'estimation à la moyenne. Les résultats des régressions par quantile montrent une pénalité salariale pour les employés informels dans la moitié inférieure de la distribution et pas de différence dans la moitié supérieure. En revanche, les indépendants et les entrepreneurs du secteur informel ont des salaires moyens conditionnels plus élevés que les salaires moyens pour l'emploi formel. Sur l'ensemble de la distribution des salaires, cependant, nous constatons un écart salarial négatif dans le quartile inférieur et un écart salarial fortement positive dans le quartile le plus élevé, indiquant un secteur informel segmenté avec libre entrée dans le bas et du rationnement dans le haut. Ce Document de travail se rapporte à l’Étude économique de l’OCDE 2014 sur la Fédération de Russie (www.oecd.org/etudes/russie).

Suggested Citation

  • Hartmut Lehmann & Anzelika Zaiceva, 2013. "Informal Employment in Russia: Definitions, Incidence, Determinants and Labour Market Segmentation," OECD Economics Department Working Papers 1098, OECD Publishing.
  • Handle: RePEc:oec:ecoaaa:1098-en
    DOI: 10.1787/5k3v1tqzmzg7-en
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    1. Thomas Dohmen & Melanie Khamis & Hartmut Lehmann, 2010. "Risk Attitudes and the Incidence of Informality among Workers: Evidence from a Transition Country," ESCIRRU Working Papers 22, DIW Berlin, German Institute for Economic Research.
    2. Lehmann, Hartmut & Muravyev, Alexander & Razzolini, Tiziano & Zaiceva, Anzelika, 2013. "The wage and non-wage costs of displacement in boom times: Evidence from Russia," Journal of Comparative Economics, Elsevier, vol. 41(4), pages 1184-1201.
    3. Lehmann, Hartmut & Razzolini, Tiziano & Zaiceva, Anzelika, 2011. "Job Separations and Informality in the Russian Labor Market," IZA Discussion Papers 6230, Institute of Labor Economics (IZA).
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    6. Hartmut Lehmann & Anzelika Zaiceva, 2013. "Informal Employment in Russia: Definitions, Incidence, Determinants and Labour Market Segmentation," OECD Economics Department Working Papers 1098, OECD Publishing.
    7. Slonimczyk, Fabian, 2011. "The effect of taxation on informal employment: evidence from the Russian flat tax reform," MPRA Paper 35404, University Library of Munich, Germany.
    8. V. Gimpelson & A. Zudina., 2011. "Informal Workers in the Russian Economy: Who Are They and How Many?," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 10.
    9. Krstic, Gorana & Sanfey, Peter, 2007. "Mobility, poverty and well-being among the informally employed in Bosnia and Herzegovina," Economic Systems, Elsevier, vol. 31(3), pages 311-335, September.
    10. Henley, Andrew & Arabsheibani, G. Reza & Carneiro, Francisco G., 2009. "On Defining and Measuring the Informal Sector: Evidence from Brazil," World Development, Elsevier, vol. 37(5), pages 992-1003, May.
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    12. Harris, John R & Todaro, Michael P, 1970. "Migration, Unemployment & Development: A Two-Sector Analysis," American Economic Review, American Economic Association, vol. 60(1), pages 126-142, March.
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    14. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
    15. Lehmann, Hartmut & Pignatti, Norberto, 2007. "Informal Employment Relationships and Labor Market Segmentation in Transition Economies: Evidence from Ukraine," IZA Discussion Papers 3269, Institute of Labor Economics (IZA).
    16. H. Lehmann & A. Zaiceva, 2013. "Informal Employment in Russia: Incidence, Determinants and Labor Market Segmentation," Working Papers wp903, Dipartimento Scienze Economiche, Universita' di Bologna.
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    Cited by:

    1. Anita Staneva & G Arabsheibani, 2014. "Is there an informal employment wage premium? Evidence from Tajikistan," IZA Journal of Labor & Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 3(1), pages 1-24, December.
    2. Hartmut Lehmann, 2015. "Informal Employment in Transition Countries: Empirical Evidence and Research Challenges," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 57(1), pages 1-30, March.
    3. Gustavo A. García, 2017. "Labor Informality: Choice or Sign of Segmentation? A Quantile Regression Approach at the Regional Level for Colombia," Review of Development Economics, Wiley Blackwell, vol. 21(4), pages 985-1017, November.
    4. Mirkasimov, Bakhrom & Ahunov, Muzaffar, 2017. "Labor markets and informality: the case of Central Asia," MPRA Paper 78751, University Library of Munich, Germany.
    5. Lehmann, Hartmut & Pignatti, Norberto, 2018. "Informal employment relationships and the labor market: Is there segmentation in Ukraine?," Journal of Comparative Economics, Elsevier, vol. 46(3), pages 838-857.
    6. Sahoo, Bimal & Neog, Bhaskar Jyoti, 2015. "Heterogeneity and participation in Informal employment among non-cultivator workers in India," MPRA Paper 68136, University Library of Munich, Germany.
    7. Hartmut Lehmann & Anzelika Zaiceva, 2013. "Informal Employment in Russia: Definitions, Incidence, Determinants and Labour Market Segmentation," OECD Economics Department Working Papers 1098, OECD Publishing.
    8. Lehmann, Hartmut & Zaiceva, Anzelika, 2013. "Re-defining Informal Employment and Measuring its Determinants: Evidence from Russia," IZA Discussion Papers 7844, Institute of Labor Economics (IZA).
    9. Lilas Demmou & Andreas Wörgötter, 2015. "Boosting Productivity in Russia: Skills, Education and Innovation," OECD Economics Department Working Papers 1189, OECD Publishing.
    10. Duman, Anil, 2024. "The Diversity of Informal Employment: a survey of drivers, outcomes, and policies," OSF Preprints yg3t7, Center for Open Science.
    11. Duman, Anil, 2020. "Pay Gaps and Mobility for Lower and Upper Tier Informal Sector Employees: an investigation of the Turkish labor market," GLO Discussion Paper Series 655, Global Labor Organization (GLO).
    12. Gashi Ardiana & Williams Colin C., 2019. "Evaluating the Prevalence and Distribution of Unregistered Employment in Kosovo: Lessons from a 2017 Survey," South East European Journal of Economics and Business, Sciendo, vol. 14(1), pages 7-20, June.

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    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J40 - Labor and Demographic Economics - - Particular Labor Markets - - - General
    • P23 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Factor and Product Markets; Industry Studies; Population

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