Providing social benefits in Russia: redefining the roles of firms and government

Simon Commander and Richard Jackman

No 1184, Policy Research Working Paper Series from The World Bank

Abstract: Russian firms commonly provide many nonmonetary benefits to workers, including such benefits as housing and some aspects of education and health care. Nonmonetary benefits may amount to 35 percent of labor costs, which is high compared with OECD countries. In a market economy, most of these benefits would be provided by local governments. The authors explain why the obvious solution - transferring social benefits and services from firms to local government or other agencies - is not so simple. At the same time, they outline the inefficiencies associated with firms providing such services and benefits. They explore the issues involved in calculating how social benefits should be divided between firms and the government and identify problems and options associated with the transition to a new division of rights and responsibilities. The main problem is housing. After a government decree in February 1993, steps have been taken to accelerate privatization, but they have been piecemeal. The main stumbling block is the financing and management of common property. The problem of free riders and the lack of an appropriate institutional setting is likely to exacerbate the problems of who handles and pays for common maintenance. The authors argue that a more systematic general program of divestiture in housing is essential. Part of this must be an explicitly new institutional arrangement for addressing the management problem. The quality of the housing stock varies greatly, so they suggest a scheme and possible financing for dampening the large scale effects of privatization and for ensuring a minimum level of quality for divested housing stock. They discuss the divestiture and related financing problems in a number of settings. What happens, for example, in a company town when the company ceases operation? Who covers benefits for the workers left without a job? What compensatory financial supports are provided in such a town, given existing budget arrangements?

Keywords: Health Monitoring&Evaluation; Public Sector Economics&Finance; Banks&Banking Reform; Municipal Financial Management; Housing&Human Habitats (search for similar items in EconPapers)
Date: 1993-09-30
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Citations: View citations in EconPapers (6)

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