The authors use a rich personnel data set from a Russian firm for the years 1997 to 2002 to analyze how the firm adjusts wages and employment during this period in which local labor market conditions changed in the aftermath of the financial crisis in 1998. They relate the development of turnover and wages for various employment categories to alternative models of wage and employment determination. The authors argue that the firm's behavior is consistent with the predictions of efficiency wage models of the shirking and turnover type.
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