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Open Access Publications from the University of California

More Than Shock Therapy: Market Transition, Employment, and Income in Russia, 1991-1995


We assess 14 predictions from market transition theory using survey data on employment, earnings, and income in Russia, during the first five years of market reform. Although the private sector has grown, self-employment is still rare. Incomes are down, and unemployment is up. Some entrepreneurs and managers have achieved dramatic success, while most Russians have steadily lost ground to hyper-inflation. The upshot is a distended income distribution and unprecedented income inequality. Distinctive features of late Soviet-era stratification persist: low returns to education, a gender gap in earnings, and low earnings among professionals. The Russian market transition offers more opportunity in trade, consumer services, and speculation and fewer in manufacturing than do other emerging markets. This dynamic corresponds to the image of "merchant capitalism" and contradicts the predictions of market transition theory.

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