Complementarity and custom in wage contract violation

Arbeitspapier

We analyze a model of wage delay in which strategic complementarity arises because each employer's costs of violating its contracts decrease with the arrears in its labor market. The model is estimated on panel data for workers and firms in Russia, facilitating identification through fixed effects for employees, employers, and local labor markets, and instrumental variables based on policy interventions. The estimated reaction function displays strongly positive neighborhood effects, and the estimated feedback loops - worker quits, effort, strikes, and legal penalties - imply that costs of wage delays are attenuated by neighborhood arrears. We also study a nonlinear case with two stable equilibria: a punctual payment and a late payment equilibrium. The estimates imply that the theoretical conditions for multiple equilibria under symmetric labor market competition are satisfied in our data.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Upjohn Institute Working Paper ; No. 06-129

Classification and Topics

• Classification: Wirtschaft ; Relation of Economics to Other Disciplines ; Current Heterodox Approaches: Historical; Institutional; Evolutionary ; Wages, Compensation, and Labor Costs: General ; Illegal Behavior and the Enforcement of Law ; Transactional Relationships; Contracts and Reputation; Networks ; Formal and Informal Sectors; Shadow Economy; Institutional Arrangements ; Socialist Enterprises and Their Transitions ; Socialist Systems and Transitional Economies: Legal Institutions; Illegal Behavior
• Subject: contract violation ; wage arrears ; social custom ; strategic complementarity ; neighborhood effect ; social interactions ; multiple equilibria ; network externality ; transition ; Russia ; Lohn ; Zahlungsmoral ; Vertrag ; Soziale Norm ; Soziale Beziehungen ; Gleichgewicht ; Theorie ; Russland

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Earle, John S. ; Sabirianova Peter, Klara
• Event: Veröffentlichung
• (who): W.E. Upjohn Institute for Employment Research
• (where): Kalamazoo, MI
• (when): 2006

Further information

• DOI: doi:10.17848/wp06-129
• Handle: http://hdl.handle.net/10419/64346
• Last update: 10.03.2025, 11:46 AM CET