Employment concentration and resource allocation: one-company towns in Russia

The paper looks at the effects of employment concentration on resource allocation with a particular focus on one-company towns in Russia: towns where a single company accounts for a significant share of total employment. Empirical analysis of firms’ production functions indicates that firms located in one-company towns are characterised by lower labour productivity, higher marginal capital productivity and lower overall productivity pointing towards significant labour hoarding. One-company town firms are also found to be financially more vulnerable. The paper argues that the dominance of natural resources in the Russian economy and employment concentration are closely linked.