IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/21940.html
   My bibliography  Save this paper

Redundancies in an industry in transition: who gets fired and why? Evidence from one consumer-goods industry in Russia

Author

Listed:
  • Rinaldi, Gustavo

Abstract

Does employee productivity explain why during a period of crisis firms fired relatively more blue-collar than white-collar workers and why, when conditions improved, they began to hire relatively more blue collars? Are redundancies targeted towards the least productive workers? Was firms’ behaviour profit maximising? These questions are investigated in the extreme circumstances of the footwear industry in Russia in the period 1994-2000. Firms in this industry underwent a major upheaval in these years. Part of their response was to downsize the blue-collar workforce more severely than the whitecollars. Was this because (a) white collar employees had higher marginal productivity or (b) because the technical rate of substitution of white collar labour with blue collar labour was greater than the factor price ratio of these two inputs If it turns out that the marginal productivity of white collar employees was the higher, we could conclude that they were embodying more human capital (Becker, 1962); if they were no more productive than blue collars, this could mean that they had been privileged during downsizing for some institutional reasons, e.g. a prior commitment towards higher-ranking staff (Lazear, 1979; Lazear and Rosen, 1981). If it turns out that the technical rate of substitution of white collar labour with blue collar labour was greater than their factor price ratio, this would suggest that the firms’ downsizing policies were consistent with profit-maximising precepts. Russian footwear is a suitable industry for investigation because there are many units, which use a standard technology, and with relatively little political interference. The paper uses Translog and Cobb Douglas production functions with ordinary least squares, two-step least squares and stochastic frontier analysis, both in a panel and in a cross-section setting. Results show that white collar employees were not only more productive than blue collar employees but also the technical rate of substitution of white collar labour with blue collar labour was greater than the factor price ratio of these two inputs. This suggests that even in a turbulent period and with a Soviet heritage, the firms behaved as profit-maximising agents. Institutional factors may also have operated, but they do not need to be invoked in explaining the data.

Suggested Citation

  • Rinaldi, Gustavo, 2007. "Redundancies in an industry in transition: who gets fired and why? Evidence from one consumer-goods industry in Russia," MPRA Paper 21940, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:21940
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/21940/1/MPRA_paper_21940.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Gary S. Becker, 1962. "Investment in Human Capital: A Theoretical Analysis," NBER Chapters, in: Investment in Human Beings, pages 9-49, National Bureau of Economic Research, Inc.
    2. Saul Estrin & Alan A. Bevan & Boris Kuznetsov & Mark E. Schaffer & Manuela Angelucci & Julian Fennema & Giovanni Mangiarotti, 2001. "The Determinants of Privatised Enterprise Performance in Russia," William Davidson Institute Working Papers Series 452, William Davidson Institute at the University of Michigan.
    3. Devereux, Paul J, 2000. "Task Assignment over the Business Cycle," Journal of Labor Economics, University of Chicago Press, vol. 18(1), pages 98-124, January.
    4. Lazear, Edward P, 1979. "Why Is There Mandatory Retirement?," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1261-1284, December.
    5. Walter Y. Oi, 1962. "Labor as a Quasi-Fixed Factor," Journal of Political Economy, University of Chicago Press, vol. 70(6), pages 538-538.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. C. Sofia Machado & Miguel Portela, 2011. "Age and opportunities for promotion," NIPE Working Papers 03/2011, NIPE - Universidade do Minho.
    2. William J. Carrington & Bruce Fallick, 2014. "Why Do Earnings Fall with Job Displacement?," Working Papers (Old Series) 1405, Federal Reserve Bank of Cleveland.
    3. Dohmen, Thomas J. & Pfann, Gerard A., 2004. "Worker separations in a nonstationary corporate environment," European Economic Review, Elsevier, vol. 48(3), pages 645-663, June.
    4. repec:eee:labchp:v:1:y:1986:i:c:p:525-602 is not listed on IDEAS
    5. Jäger, Simon & Heining, Jörg, 2019. "How Substitutable Are Workers? Evidence from Worker Deaths," MPRA Paper 109757, University Library of Munich, Germany, revised 01 Jan 2019.
    6. Huizinga, Harry, 2000. "Intrafirm information management and wage dynamics," European Economic Review, Elsevier, vol. 44(1), pages 163-180, January.
    7. William J. Carrington, 2015. "Do We Know Why Earnings Fall with Job Displacement? Working Paper: 2015-01," Working Papers 49908, Congressional Budget Office.
    8. Pfeifer, Christian, 2009. "An Intra-Firm Perspective on Wage Profiles and Employment of Older Workers with Special Reference to Human Capital and Deferred Compensation," Hannover Economic Papers (HEP) dp-413, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
    9. Martin Abraham & Bernhard Prosch, 2000. "Long-Term Employment Relationships By Credible Commitments," Rationality and Society, , vol. 12(3), pages 283-306, August.
    10. Lindgren, Petter Y. & Presterud, Ane Ofstad, 2021. "Expanding the Norwegian Armed Forces in the Time of Corona: Benefit-Cost Analysis in the Context of High Unemployment Rate," MPRA Paper 106405, University Library of Munich, Germany.
    11. Huizinga, H.P., 1996. "Intrafirm Information Transfer and Wages," Other publications TiSEM e39998b3-304d-485b-b186-3, Tilburg University, School of Economics and Management.
    12. Stephan Humpert, 2012. "Age and Gender Differences in Job Opportunities," Working Paper Series in Economics 235, University of Lüneburg, Institute of Economics.
    13. Christian Pfeifer, 2009. "Adjustment of Deferred Compensation Schemes, Fairness Concerns, and Hiring of Older Workers," Working Paper Series in Economics 151, University of Lüneburg, Institute of Economics.
    14. Kawai, Eizo, 2001. "Re-examination of wage, employment, and hours adjustments: what is crucial for differences in the adjustments?," Japan and the World Economy, Elsevier, vol. 13(4), pages 483-497, December.
    15. Jeremy T. Fox, 2010. "Estimating the Employer Switching Costs and Wage Responses of Forward-Looking Engineers," Journal of Labor Economics, University of Chicago Press, vol. 28(2), pages 357-412, April.
    16. Lloyd Ulman, 1992. "Why Should Human Resource Managers Pay High Wages?," British Journal of Industrial Relations, London School of Economics, vol. 30(2), pages 177-212, June.
    17. Christian Grund & Dirk Sliwka, 2007. "Reference-Dependent Preferences and the Impact of Wage Increases on Job Satisfaction: Theory and Evidence," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 163(2), pages 313-335, June.
    18. Grund, Christian & Sliwka, Dirk, 2001. "The Impact of Wage Increases on Job Satisfaction - Empirical Evidence and Theoretical Implications," IZA Discussion Papers 387, Institute of Labor Economics (IZA).
    19. repec:eee:labchp:v:1:y:1986:i:c:p:305-355 is not listed on IDEAS
    20. Oyer, Paul & Schaefer, Scott, 2011. "Personnel Economics: Hiring and Incentives," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 4, chapter 20, pages 1769-1823, Elsevier.
    21. Grund, Christian, 2011. "Job Preferences as Revealed by Employee Initiated Job Changes," IZA Discussion Papers 6127, Institute of Labor Economics (IZA).
    22. Bergemann, Annette & Mertens, Antje, 2004. "Job Stability Trends, Layoffs, and Transitions to Unemployment: An Empirical Analysis for West Germany," IZA Discussion Papers 1368, Institute of Labor Economics (IZA).

    More about this item

    Keywords

    Productivity; blue collars; white collars; transition; footwear;
    All these keywords.

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:21940. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.