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Working paper

Transition to Postindustrial Society. A study of the Service Sector Employment in Russia

The transition to market economic systems in the countries of Central and Eastern Europe and the former Soviet Union involves fundamental shifts in the sectoral allocation of resources, in particular, dramatic changes in employment structures. Development of services in Russia turns to be more impressive than in many other transitional countries. This paper uses the Baumol-Fuchs model of the service sector expansion to estimate underdevelopment of services in Russia prior the transition and measure the progress in catching-up that has taken place thus far. Based on the Russian Longitudinal Monitoring Survey (1994-2000) empirical analysis demonstrates that sectoral variation in the difference between withdrawal from and entrance to the labor force is the main reason of changing distribution of labor. For job-to-job transitions low quality of current job matches, tenure effects and labor market segmentation are the most important explanation of inter-sectoral labor mobility.