Who Wins the Wage Race: A Study of Relative Earnings Mobility in Russia (2000–2005)

Abstract

Using the data from the Russian Longitudinal Monitoring Survey (RLMS), the paper investigates the changes in individual earnings over the period 2000–2005. Our results suggest that the magnitude of earnings mobility is significantly higher in Russia than in advanced market economies. Mobility leads to a sizable reduction in long-term inequality. We find that inequality in earnings cumulated over a six-year period is 10–20% lower than in cross-sections. The bottom and the top deciles of the distribution contribute most to the reduction in inequality due to larger changes in the absolute earnings. However, larger changes in relative positions are more likely in the middle of the distribution. We demonstrate that job changes are one of the major determinants of faster growth of relative earnings in Russia. This finding can be related to high dispersion of earnings within narrow professional groups and inefficiency of promotion mechanisms in internal labour markets.