Does location affect employment? Evidence from the high north of Russia

Abstract

Local labour markets within one country can be characterized by different outcomes because of their geographical and economic peculiarities. The unique features of the labour markets of the High North regions of Russia include compensative differentials and specific labour protection legislation together with the specific geographical characteristics. The aim of the paper is to investigate what peculiarities arise in employment as a result of location in the areas of the High North of Russia. Using aggregate regional data for the northern regions of Russia from 2005 to 2014 we estimated the dynamic fixed effects models for the number of employees and net migration. It was discovered that geographical characteristics affect employment in the High North of Russia more than wages. Labour supply exceeds labour demand in the northern regions of Russia because of strong positive wage elasticity of net migration. We can surmise that regulation of wages and migration should be a part of common economic policy in the High North regions of Russia.