State Jobs, Household Insurance and Bargaining Power in Russia

Penka Kovacheva, Princeton University

This paper investigates the response of Russian households to the novel choice between private and state employers, which they first faced in 1991. Given the trade-off between higher-paid and riskier private sector and lower-paid and more secure state sector, married men prefer the former sector whereas married women prefer the latter. Among singles, there is no difference by gender. I model these intra-household decisions of where to work in a bargaining setting. An individual who takes the lower-paid job get a higher transfer from her higher-paid spouse as a household insurance reward. I estimate this model on panel data from 1992-2008. I find that individuals with spouses in more precarious job situations are more likely to take state jobs while controlling for observed individual characteristics and unobserved time-invariant preferences. This suggests a role for state jobs as insurance mechanisms to manage the household risk during the uncertain transition years.