Inside the Black Box: The Evolution of Internal Labor Markets During Economic Transition in Russian and Ukrainian Firms

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We analyze personnel data of large Russian and Ukrainian firms in the manufacturing sector, in order to shed light on the internal organization of labor in Soviet and Post-Soviet firms during the transition from a centrally planned to a market economy. This marks the first attempt of studying detailed personnel records of firms in transition economies. We have already collected some data from the personnel records of one large Russian manufacturing firm for 1997 through 2003. These data will be refined by compiling additional information on worker and career characteristics and extended by gathering data covering the period from 1990 until 2008. This will allow us to analyze the internal labor market adjustments during perestroika and all stages of transition. In addition, we will collect personnel data in a similar format from two more Russian firms and at least one Ukrainian firm. We are the first to provide empirical evidence on the functioning of internal labor markets in transition economies. Complementing the literature on Western internal labor markets, we will make a crucial contribution by establishing those patterns of internal labor markets that prevail in any institutional setting and any economic environment and those patterns that are idiosyncratic. Analyzing what happens inside firms during transition is a constructive method to better understand the organizational and behavioral shifts in firms that undergo large scale restructuring. Therefore, the empirical study will also provide valuable insights for the analysis of transition and of other economies facing a major episode of structural change and thus will be useful for economic agents as well as for policy makers.