More Shock than Therapy: Market Transition, Employment, and Income in Russia, 1991–1995

Abstract

Sixteen predictions from market transition theory are assessed 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. A distended income distribution reflects 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 less in manufacturing than do other emerging makets. This corresponds to “merchat capitalism” and contradicts the predictions of market transition theory.Everything the Communists told us about communism was a lie. Everything they told us about capitalism turns out to be true. (Popular Russian joke, circa 1996)