Issues for economic transition in Russia: Industrial structure, worker share ownership, and internal migration.

Abstract

Economic transition from central planning to a market requires a multitude of reforms and adjustments. This dissertation addresses three issues that arise along the path of reform in Russia. The first chapter examines the initial conditions affecting product market competition in Russia. In it, my coauthors and I analyze the prospects for competition based on the inherited structure of industry. Using the 1989 Soviet Census of Industry, we compare the size distribution of firms and industrial concentration in Russia with the United States and other countries. We find that a very small share of the Russian economy is accounted for by monopolistic or concentrated industries. We then analyze the market segmentation in Russia that arises from geographic and ministerial constraints and explain how such market segmentation can impede competition. The second chapter addresses the actions in the market for corporate control of rank-and-file employees who, as a result of Russian privatization, are both workers and shareholders in their enterprises. I derive a model to analyze the efficiency outcomes of bids for enterprise control when workers own a pivotal fraction of the shares. The model shows that without worker share ownership, outsiders are able to bring about inefficient changes in control, or takeovers, but with worker share ownership, some efficient takeovers are blocked. However, when the workers as pivotal shareholders together with the outsider are able to write a side contract, for example a contract for severance payments to laid-off workers, in addition to the bid price for the shares, all efficient outcomes are possible. In the third chapter, I use linear and non-linear regression analysis to examine the movements of individuals, and thus of labor, between geographic markets in Russia during early transition, in particular looking at the economic determinants of this migration. The evidence suggests that gross movements do conform to general economic determinants, in particular, migration is responding to wages and housing privatization. Analysis at the individual level though, shows that while outmigration determinants are as theory predicts in the first period, they may change some during the course of transition.