Wage Determination in Russia An Econometric Investigation

Using a firm level dataset from four regions of Russia covering 1996/97, an investigation was carried out into how the surplus created within the firm is divided between profits and wages. An efficient bargaining framework based on the work of Svejnar (1986) is employed which takes into account the alternative wage or outside option available to employees in the firm as well as the value added per employee. Statistical differences in the share of the surplus taken by employees employed in state, private and mixed forms of firms are found. In addition, the results prove sensitive to the presence of outliers and influential observations. A variety of diagnostic methods are employed to identify these influential observations and robust methods are employed to lessen the influence of them. In particular, one observation proved especially influential, its deletion causing dramatic changes in the reported coefficients of the wage regression. Many of the diagnostic and robust methods utilised proved incapable of accommodating this gross outlier. Those methods which proved capable of detecting this gross outlier or of accommodating it, included robust regression, winsorizing, the Hadi and Siminoff algorithm, Cook’s Distance and Covratio. JEL Classification: C21, J300.