Compensating Differentials in Emerging Labor and Housing Markets: Estimates of Quality of Life in Russian Cities

60 Pages Posted: 18 Nov 2003

See all articles by Mark Berger

Mark Berger

University of Kentucky - Department of Economics

Glenn C. Blomquist

University of Kentucky - Department of Economics

Klara Sabirianova Peter

University of North Carolina - Chapel Hill; IZA Institute of Labor Economics; Centre for Economic Policy Research (CEPR)

Date Written: October 2003

Abstract

The existence of compensating differentials in Russian labor and housing markets is examined using data from the Russian Longitudinal Monitoring Survey (RLMS) augmented by city and regional-specific characteristics from other sources. While Russia is undergoing transition to a market economy, we find ample evidence that compensating differentials for location-specific amenities exist in the labor and housing markets. Our estimated wage and housing value equations suggest that workers are compensated for differences in climate, environmental conditions, ethnic conflicts, crime rates, and health conditions, after controlling for worker characteristics, occupation, industry, and economic conditions, and various housing characteristics. Moreover, we find evidence that these compensating differentials exist even after controlling for the regional pay differences ("regional coefficients") used by the Russian government to compensate workers for living in regions that are designated as less desirable. We rank 953 Russian cities by quality of life as measured by a group of eleven amenities. Sizable variation in the estimated quality of life across cities exists. The highest ranked cities tend to be in relatively warm areas and areas in the western, European part of the country. In addition, our quality of life index is positively correlated with net migration into a region, suggesting workers are attracted to amenity-rich locations. Overall, we find that sufficient market equilibrium exists and a model of compensating differentials with controls for disequilibrium yields useful information about values of location-specific amenities and quality of life in this large transition economy.

Keywords: compensating differentials, equilibrium, hedonic, quality of life, amenities, implicit prices, labor market, housing market, transition, Russia

JEL Classification: D5, H4, J3, J6, P2, P3, Q2, R1, R2

Suggested Citation

Berger (deceased), Mark C. and Blomquist, Glenn C. and Sabirianova Peter, Klara, Compensating Differentials in Emerging Labor and Housing Markets: Estimates of Quality of Life in Russian Cities (October 2003). Available at SSRN: https://ssrn.com/abstract=460561

Mark C. Berger (deceased)

University of Kentucky - Department of Economics

N/A

Glenn C. Blomquist

University of Kentucky - Department of Economics ( email )

Department of Economics
Gatton Business & Economics Bldg 335
Lexington, KY 40506-0034
United States
859-257-3924 (Phone)
859-323-1920 (Fax)

HOME PAGE: http://gatton.uky.edu/faculty/blomquist/

Klara Sabirianova Peter (Contact Author)

University of North Carolina - Chapel Hill ( email )

Chapel Hill, NC 27599
United States

HOME PAGE: http://www.unc.edu/~kpeter

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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