Membership Benefits or Selection Effects? Why Former Communist Party Members Do Better in Post-Soviet Russia

Social Science Research 29, 25–50 (2000) doi:10.1006/ssre.1999.0651, available online at http://www.idealibrary.com on

Membership Benefits or Selection Effects? Why Former Communist Party Members Do Better in Post-Soviet Russia Theodore P. Gerber Department of Sociology, University of Arizona The Communist Party of the Soviet Union (CPSU) served as an important social stratification mechanism. With the collapse of the Soviet state and the transition from state socialism in Russia, the institutional basis for former CPSU members’ advantages disappeared. Thus, if former members still enjoy higher earnings than nonmembers, their advantages must stem from their superior human capital, social capital, or the unmeasured attributes that helped them join the Party in the first place. Using the Russian component of the multinational survey, ‘‘Social Stratification in Eastern Europe after 1989: General Population Survey,’’ I model the effects of Party membership on the personal incomes of Russian adults in summer 1993, 1.5 years after the Soviet collapse. OLS regressions indicate that former Party members enjoy an income advantage after the collapse of Communism, net of other variables. Endogenous switching regressions reveal that this advantage stems entirely from selection into the Party on the basis of unobserved variables. Net of the selection effect, there is no residual return to Party membership. The findings imply that institutional change in formerly Communist systems does not fully account for who gets ahead: some individuals can adapt to changed institutional contexts so as to preserve their advantages. r 2000 Academic Press

The Communist Party of the Soviet Union (CPSU) was the dominant institution in Soviet society, the collective ruler of the Soviet people. Apart from its political and economic roles, the CPSU served as a crucial social stratification mechanism unique to state socialist societies. Scholars studying the Soviet Union devoted little attention to this particular aspect of the Party, focusing instead on its political An earlier version of this paper was presented at the semiannual meeting of the International Sociological Association Research Committee on Social Stratification (RC28), Quebec City, Canada, August 1997. I thank the participants at the meeting for helpful feedback, Valery Yakubovich for extensive comments on an earlier draft, the anonymous reviewers for useful suggestions, Don Treiman for providing the data, Larry Singell, Rob Mare, and Mike Hout for related discussions, and Edward Akhmetshin for research assistance. I bear full responsibility for any errors. Research for this article was supported by a Summer Research Award from the University of Oregon College of Arts and Sciences. Address correspondence and reprint requests to Theodore Gerber, Department of Sociology, Social Science Building, Room 400, P.O. Box 210027, University of Arizona, Tucson, AZ 85721. E-mail: [email protected]. 25 0049-089X/00 $35.00 Copyright r 2000 by Academic Press All rights of reproduction in any form reserved.

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and economic power, institutional structure, internal workings, and overall place within the Soviet system (Rigby, 1968; Hill and Frank, 1986; Gill and Pitty, 1997). With the demise of the Soviet system in Russia, however, the Party’s operation as a source of material well-being for its members takes on increased importance for stratification theory. The breakdown of state socialism in Eastern Europe and its more gradual retreat in China have led sociologists to examine whether and how distinctively state socialist stratification processes shape inequalities in the new institutional configurations of post-Communist societies. Much of the literature has centered on Victor Nee’s ‘‘market transition theory,’’ which predicts that market reforms lead to specific changes in the principles on which earnings are allocated (Nee, 1989, 1991, 1996; Nee and Matthews, 1996). Critics of this theory argue that the transformation of state socialism produces highly diverse, path-dependent forms of economic and political institutions, which have different consequences for the nature and magnitude of emerging inequalities (Rona-Tas, 1994; Bian and Logan, 1996; Fligstein, 1996; Parish and Michelson, 1996; Stark, 1996; Szelenyi and Kostello, 1996; Walder, 1996; Xie and Hannum, 1996; Gerber and Hout, 1998). Although they may disagree over the nature of post-Communist institutions, participants in the debate over market transition theory share a key assumption: that institutions are the decisive determinants of who ‘‘wins’’ and ‘‘loses’’ during the exit from Communism. By analyzing whether former Communist Party members make out better or worse economically in post-Soviet Russia, I test this implicit assumption against an alternative view: that some people succeed regardless of institutional context. The wholesale collapse of the Soviet Union and the CPSU in 1991 removed any possible institutional basis for continued Party membership advantages. If institutions are the sole basis for material advantage, former Party members should on average have the same or lower incomes than non-Party members in post-Soviet Russia. A positive effect of former Party membership on post-Soviet earnings indicates that CPSU members thrive (at least relative to nonmembers) in a context where they have no apparent institutionalized advantage. If post-Soviet institutions do not explain former CPSU members’ advantages, then two other explanations must be considered. First, Party members may have inherited superior human capital, connections (‘‘social capital’’), and even material assets from the Soviet era. This view, in which defunct institutions still determine current prospects through the medium of these residual advantages, informs explanations of elite reproduction in post-Communist Russia and Eastern Europe (Hankiss, 1990; Staniszkis, 1991; Stark, 1992; Rona-Tas, 1994; Borocz and Rona-Tas, 1995; Hanley, Yershova, and Anderson, 1995; Szelenyi and Szelenyi, 1995; Szelenyi, Szelenyi, and Kovach, 1995; Kryshtanovskaia and White, 1996). Past institutional benefits were ‘‘converted’’ into more durable currencies that maintain their value even in the new institutional context. This scenario is plausible for elites, but less so for Party members at large. A second explanation, generally overlooked, sees Party members’ advantages

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not as residual benefits of membership but as a selection effect. Party members differ from nonmembers in unobservable characteristics such as ambition, opportunism, and ruthlessness. These traits earlier facilitated their selection into the Party and now provide them with a leg up in the new, post-Soviet setting. To examine these alternatives, I model the effects of Party membership on the personal incomes of Russian adults in summer 1993, 1.5 years after the formal collapse of the Soviet Union, using ordinary least squares (OLS) and endogenous switching regressions (ESR). ESRs (Mare and Winship, 1988; Gamoran and Mare, 1989) control for the simultaneous effects of unmeasured variables on selection into positions (in this case, Party membership or nonmembership) and on outcomes (earnings). This modeling approach is therefore well-suited to determining the extent to which any advantage of former CPSU membership stems from selection effects rather than past or present institutional advantages. The data show that former Party members earned higher average incomes in the summer of 1993 than Russians who had not been Party members. Their advantage remains net of other standard factors that determine earnings. However, ESRs show that OLS estimates of the effects of Party membership are upwardly biased. Self-selection on unmeasured variables is the sole basis for the post-Soviet success of Party members. Once selection bias is controlled, membership, if anything, decreases earnings. Some compositional effects of observed variables, which represent residual membership benefits, work slightly to the advantage of Party members, but not enough to compensate them for lower returns based on other covariates. Yet, the returns to former Party members’ unmeasured attributes more than offset Party members’ disadvantages due to the other effects. These findings support the view that individuals with certain unmeasured characteristics succeed regardless of institutional context. These individuals are not the ‘‘playthings of formal institutions’’ (Rona-Tas, 1994, p. 46). Instead, they adopt to and/or circumvent whatever institutions they confront. MARKET TRANSITION, ELITE REPRODUCTION, AND STRATIFICATION: THE TYRANNY OF INSTITUTIONS? The market transition controversy is a debate about institutions. According to Nee and his associates, markets intrinsically reward productivity and entrepreneural initiative, not political position, the main basis for reward under the redistributive institutions of state socialism (Nee, 1989, 1991, 1996; Nee and Cao, 1996; Nee and Matthews, 1996). As market transactions grow in importance following economic reforms or state socialist collapse, the returns to education should rise and the returns to political position should decline. Institutional change drives stratification processes: ‘‘Changes in the mechanism of stratification in the transitions from state socialism are caused, I claim, by changing institutions—the shift to markets and corresponding changes in the structure of property rights.’’ (Nee, 1996, p. 928, emphasis added) Market transition theory has been challenged with contrary empirical findings and theoretical criticism. For example, Yu Xie and Emily Hannum (1996) found

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that the returns to education were lower and the returns to Communist Party membership higher in cities with greater economic growth. Like Nee, they advocate ‘‘economic and sociological explanations that give primary attention to institutions as agents of stratification in socialist and reforming-socialist economies’’ (Xie and Hannum, 1996, p. 984, emphasis added). But they reject the idea that China’s institutions can be adequately conceptualized as standing at some point on a continuum between state socialism and capitalism. In particular, they note the absence of true labor markets in urban China, despite the spread of product and service markets. Other critics call for more careful scrutiny of political institutions, the hybrid character of emergent economic institutions, the institutional diversity of modern market economies, and the path-dependent, uneven nature of the transition in different countries (Bian and Logan, 1996; Fligstein, 1996; Parish and Michelson, 1996; Stark, 1996; Walder, 1996; Gerber and Hout, 1998). As Andrew Walder puts it: ‘‘Markets per se are not the issue. What matters are the variable institutions and conditions that define markets, and our theory and research must put them at center stage.’’ (Walder, 1996, pp. 1060–1061, emphasis added). As the preceding quotations demonstrate, all sides in the market transition debate see institutions as the crucial force shaping patterns of stratification during the exit from state socialism. They disagree on how to properly characterize the emergent institutions and on which institutions to emphasize. Certainly, political and economic institutions do shape stratification in reforming and postCommunist countries. However, by focusing exclusively on institutions, we overlook how certain individual-level characteristics help determine whether people succeed or fail whatever the institutional context. Some individual traits—ambition, opportunism, ruthlessness—probably help those who possess them in abundance to obtain material advantages in the presence of state socialist, capitalist, or hybrid institutions alike. We find evidence of the importance of individual-level traits in the capacity of various stripes of Communist-era elites to reproduce their advantaged status in post-Communist Hungary, Poland, and Russia, despite the wholesale abandonment of state socialist institutions (Hankiss, 1990; Staniszkis, 1991; Rona-Tas, 1994; Borocz and Rona-Tas, 1995; Hanley et al., 1995; Szelenyi and Szelenyi, 1995; Szelenyi, Szelenyi, and Kovach, 1995; Kryshtanovskaia and White, 1996; Stark and Bruszt, 1998, chap. 2). Unlike China, where reforms have been gradual, partial, and mainly limited to the economic realm, these countries have eliminated state socialist institutions in rapid fashion. Thus, the reproduction of their elites cannot result from the persistence of state socialist institutions in the face of market reforms.1 Instead, this literature proposes three mutually compatible explanations: (1) elites use their Communist-era political power and insider knowledge to obtain valuable assets during the course of market transition; (2) 1 Bian and Logan (1996) find that this ‘‘power persistence’’ hypothesis applies to China: market reforms increase the earnings of Party members and those who have jobs with redistributive power.

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they have superior expertise and administrative skill, which are highly rewarded by market institutions; and (3) they have superior social networks due to their elite positions, which enable them to better capitalize on emerging opportunities. Elite reproduction in Eastern Europe and Russia therefore suggests that institutional change alone cannot explain stratification outcomes: individuals’ capacities to respond to institutional change must be considered as well. However, this capacity may well be limited to elites, who comprise only a tiny proportion of the populations experiencing the demise of state socialism. Moreover, because elites were well-positioned institutionally in the old system to obtain material assets and were well-educated and were, presumably, embedded in more valuable social networks, it is difficult to disentangle the influence of these residual benefits of elite status. The elite studies thus provide limited leverage to resist the intellectual tyranny of institutions. We can gain more insight into the role of individual-level stratification mechanisms by examining the fate of advantages attending to Communist Party membership in a post-Communist country like Russia.2 COMMUNIST PARTY MEMBERSHIP AND EARNINGS IN RUSSIA DURING AND AFTER STATE SOCIALISM In Soviet Russia a much larger proportion of the population belonged to the CPSU than to the elite, however the latter term may be defined. In 1990 there were over 19.2 million members (including candidate members) of the CPSU, comprising almost 10% of the Soviet adult population (Hill, 1994, p. 90). In contrast, estimates put the size of the Soviet nomenklatura—a rather liberal proxy for the ‘‘elite’’—at 750,000 to 1.8 million (McAllister and White, 1995, p. 220). Under the Soviet regime, Party membership was associated with clear political and material advantages, especially during the post-Stalin era (Matthews, 1975; Yanowitch, 1977; Hill and Frank, 1986; Hill, 1994; McAllister and White, 1995). Soviet pay scales were closely tied to formal occupation title, industry, and region (Flakierski, 1993), so there may not have been any overt income return to Party membership net of employment situation. However, managers and workers alike found ways to circumvent formal strictures in many practices within enterprises, including payment (Clarke, 1995). If they chose, managers could find informal ways to enhance the earnings of Party members. Party membership also helped pave the way to more lucrative and powerful positions within the job hierarchy. The upper reaches of most career ladders were 2 Although some work has examined the returns to Communist Party membership in China (Walder, 1995; Bian and Logan, 1996; Xie and Hannum, 1996), the effects of Party membership on earnings in a country where Communist Party rule has been abandoned have not been studied. The Communist Party continues to maintain a strict monopoly on political power and to guide the economy in China. Therefore, the continuing earnings advantages of Party members could well be based on institutions. Analysis of Party members in China can be used to assess market transition theory, but not to test the main concern of the current article—whether personal attributes associated with Party membership lead to material success regardless of institutions.

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reserved primarily for Party members, even absent formal rules to this effect. Appointments to important positions throughout the economic and political structure were directly controlled by Party authorities through the so-called nomenklatura system (see Rigby, 1990, chap. 4; Kryshtanovskaia and White, 1996). But even for less vital positions, employers and managers found it advisable to hire and promote Party members.3 In addition, Party membership could lead to a remunerative career within the Party apparatus itself. We have no hard statistical evidence of a net income return to Party membership, since the relevant data could never be collected in the Soviet Union. Some indirect evidence comes from the Soviet Interview Project (SIP), a survey of former Soviet citizens who emigrated to the United States during the late 1970s and early 1980s (see Millar, 1987). Unfortunately, the study did not ascertain whether respondents had belonged to the CPSU. But SIP respondents cited ‘‘party membership or connections’’ most frequently as the ‘‘most important reason for job advancement’’ at the enterprise where they last worked in the Soviet Union (Gregory, 1987, p. 266). An analysis of income determinants using the SIP data found a significant return to ‘‘regime-support’’ activities, such as participating in party committees or workers’ committees, net of human capital, demographic factors, and job characteristics (Gregory and Kohlhase, 1988). As Party members took frequent part in such activities, we may conclude that they enjoyed a net earnings advantage. Finally, several ex-Soviet social scientists have observed that by the 1970s Soviet citizens coveted Party membership primarily for the sake of material advancement; Party members had diverse political views and generally regarded Party activities as little more than unpleasant chores (Zaslavsky, 1982, p. 32; Shlapentokh, 1989, pp. 107–114). Increasing public criticism of Party officials’ careerism, corruption, cronyism, and the like during the early 1980s confirm this view (Gill and Pitty, 1997, pp. 154–157). While overt political loyalty was a necessary condition for Party membership, other factors strongly influenced whether one became a member. Officially, anyone could join voluntarily, but in practice one had to be invited to do so (Hill and Frank, 1986). For its part, the Party aimed to recruit the most talented and productive members of society into its ranks and also sought to ‘‘saturate’’ key occupations and sectors with Party members (Harasymiw, 1984). As a result, from the end of the Second World War college-educated professional men were greatly overrepresented in the purported Party of the proletariat, despite frequent campaigns to include more workers, collective farmers, and women. Party membership was not a free meal ticket. Members paid dues and undertook various duties, such as attending regular meetings, participating in 3 We cannot say for sure why employers would tend to promote Party members. Two compatible explanations seem especially likely. Party membership probably ‘‘signaled’’ that the candidate had some desirable characteristics (e.g., ambition, productivity, political loyalty). Also, promising Party members probably seemed a safe strategy to minimize criticism of one’s decision in the case of eventual poor performance by the promotee.

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frequent discussions and schemes such as ‘‘socialist competition,’’ completing tasks, preparing reports, organizing activities, and doing various types of ‘‘ideological work.’’ Their conduct as Party members was subject to frequent evaluation and criticism. Strict submission to Party discipline was nonnegotiable. Party membership consumed time, energy, and perhaps exacted a psychic toll, as members could be required to denounce friends or colleagues or take other actions they might not have of their own free will. Would-be members had to endure an arduous application process and a 1-year probationary period. Not everyone would consider the costs associated with membership justified by the returns in material and political standing. The above implies that, in terms of its stratifying role, Party membership operated as a complex selection mechanism—a three-player game involving judgments on the part of officials (whether an individual was a suitable candidate), individuals (whether the benefits of Party membership exceeded the costs), and employers (how to consider Party membership as a criterion for hiring, salary increases, and promotion). This complicates explanations of why Party members enjoyed material advantages. It is tempting to attribute all advantages to institutionalized benefits (greater access to patronage channels, hidden perks, unwritten rules among managers that Party members should be favored). Many dissidents viewed Party recruitment as a process of ‘‘negative selection’’ whereby the least talented, most conformist members of society were promoted to insure organizational docility and stifle opposition (see Kennedy, 1991). Surely, few dissidents would sympathize with the claim that Party members may have enjoyed higher earnings due to their greater productivity. Nonetheless, we should not reject out of hand the possibility that selection into the Party was based on individual attributes and motivations that would produce material advantages regardless of the institutional setting. While it may true that joining the Party implied a ‘‘fundamental commitment to the system’’ (Hill and Frank, 1986, p. 20), Party membership could also imply a fundamental commitment to advance one’s own prospects within it. Soviet citizens who had both the ambition and the wherewithal to pursue wealth, status, and power had reason enough to join the Party regardless of their ‘‘true’’ commitment to the system, and the Party had ample cause to incorporate such citizens within its own ranks. To the extent that Party members’ advantages rested on the institutional arrangements associated with the partocratic Soviet system, their advantages should have been greatly reduced, even eliminated, once these arrangements no longer held sway. With the end of the Soviet Union in 1991, Party membership no more could serve as a criterion for occupational advancement, and the Party structure was no longer there to provide a ready-made network of organizational assets. Moreover, although the CPSU collectively ruled the Soviet Union, mere membership in the Party did not, in and of itself, provide with one sufficient political power to be ‘‘converted’’ into material assets prior to the collapse of the Soviet system. Thus, along with the Soviet system disappeared any possible institution-based advantage for CPSU members. This suggests the following

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empirical hypothesis to test whether individual-level factors play a vital role in shaping post-Communist stratification outcomes: HYPOTHESIS 1. In the post Soviet era, previous membership in the Communist Party has no effect or a negative effect on Russians’ earnings.

This would support the view that Party members owed their advantages entirely to the institutions of Communism, that markets and competitive politics allocate material rewards on different, more meritocratic, bases and that Party members were selected primarily for their political docility and professional mediocrity. If these propositions do not hold, an alternative hypothesis will obtain: HYPOTHESIS 2. In the post-Soviet era, previous membership in the Communist Party has a positive effect on earnings.

This would mean that Party members enjoy residual benefits of membership, even though the institutional context has changed, or that selection into the Party was based on unmeasured traits that also enhance material success in the post-Communist era. If H2 is confirmed, a third hypothesis is necessary to test these alternative explanations of the persistent return to CPSU membership. HYPOTHESIS 3. The advantages of previous Communist Party members are due more to the unmeasured traits which facilitated their selection into the Party than to their measured human capital or social capital.

The existing literature has emphasized human capital and social capital as factors permitting Communist-era elites to succeed (e.g., Rona-Tas, 1994; Borocz and Rona-Tas, 1995; Hanley et al., 1995). H3 suggests instead that Party members do better mainly because of unobserved, individual-level traits which motivated them to join the Party in the first place. In this case, Party membership is best viewed as a proxy for characteristics such as ambition, opportunism, a willingness to sacrifice time, energy, and (if necessary) principle for the sake of advancement, a knack for organizational or administrative activities—all of which earlier increased the likelihood that one would join the CPSU and now enhance one’s chances to succeed in the post-Communist era. DATA, MEASURES, AND METHODS Data are from the Russian component of the multinational survey, ‘‘Social Stratification in Eastern Europe after 1989: General Population Survey’’ (principal investigators: Ivan Szelenyi and Donald J. Treiman). A multistage probability sample of 5002 Russians aged 16 to 89 was interviewed in April–July 1993.4 CPSU membership was a remote possibility for respondents younger than 27 at 4

See Treiman (1994) for details on sampling, field work, quality control, and data preparation.

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the time of the survey. To avoid biasing results, they are excluded from the analysis, reducing the number of cases to 4191. Of these, an additional 1018 respondents who were not currently employed at the time of the survey are excluded, since the main dependent variable of interest is income from current occupation.5 Restricting the analysis to currently employed respondents aged 27 and older reduces the sample size to 3173. An additional 738 cases are lost to missing data on at least one of the variables in the analysis—most often, earnings (409 cases). Two outliers were also excluded, yielding a final sample of size of 2443.6 For the purpose of assessing how previous Party membership affects earnings in the post-Soviet institutional environment, the timing of the survey may seem somewhat problematic. By mid-1993 market reforms—in particular privatization— had had less time to take effect in Russia than in the Czech Republic, Hungary, and Poland. Russian ‘‘shock therapy’’ was implemented only in January 1992, and most enterprises formally remained under state ownership when the data were collected. Nonetheless, the Russian economy had already undergone dramatic changes (see Aslund, 1995; OECD, 1996; Blasi, Kroumova, and Kruse, 1997; Gerber and Hout, 1998). Russian enterprises and organizations faced free and rapidly rising prices, declining state subsidies and contracts, foreign competition, and autonomy from state-defined production targets. Most importantly, enterprises had gained considerable discretion in wage determination as early as January 1988, when the Law on State Enterprises was implemented by the Soviet government. Certainly following the collapse of the Soviet state in August 1991, management could freely adjust pay schedules and implement new wage systems (Vedeneeva, 1995). By the time the data were collected, Communist Party members had lost whatever institutionalized advantages they may have enjoyed when the Soviet system prevailed. If employers wished to adjust salaries and wages to reflect actual productivity rather than Party affiliation, they had leeway and time to do so by mid 1993. No subsequently gathered data contain sufficient information to estimate the models considered here. When such data become available, the present findings will provide a useful benchmark with which to evaluate developments since 1993. 5 If Party members were more likely to be employed at the time of the survey than nonmembers, then selection into employment would have to be incorporated into the analysis. However, among the age-eligible sample (27 and over), 75.0% of Party members and 75.9% of nonmembers were currently employed, a nonsignificant difference (t ⫽ 0.47). Most respondents not currently employed were retirees (625, or 61.4%). Only 48 respondents (4.7% of those not currently working, 1.1% of respondents over 27) said they were currently unemployed. This is not surprising given the timing of the survey. Independent data put the unemployment rate at 6% in March 1993, with unemployment being more common among Russians under 26 (Gerber and Hout, 1998, p. 20). 6 The two outliers had recorded incomes of 3,200,000 and 1,000,000 rubles. The corresponding z scores are 49.1 and 15.1. These figures are implausible for the time period in question, and the next highest income is 500,000 rubles. Most likely, they result from coder error or response error. All results reported here are obtained using case weights provided with the data to correct for biases in the sample distributions of gender, education, and size of place categories.

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My analysis proceeds as follows. I first test H1 and H2 by comparing the mean incomes of Party members and nonmembers. Then, to determine the net effect of Party membership on earnings, I use OLS to estimate an ANACOVA regression model of the form K

Yi ⫽ ␣0 ⫹ ␣1Mi ⫹

兺␣ X k

ki

⫹ ⑀i ,

(1)

k⫽2

where i subscripts individuals, Y is the natural logarithm of monthly income from main occupation during the previous month, M is a binary variable equalling one for CPSU members, 0 otherwise, X is a vector of control variables, ␣k (k ⫽ 0, . . . , K) are metric regression coefficients, including an intercept, and ⑀i is a stochastic disturbance.7 Control variables are derived from previous research on the determinants of income in post-Soviet Russia (Gerber and Hout, 1998). Education is specified as dummy variables for college, secondary (including academic secondary, ‘‘specialized’’ secondary, and vocational secondary), and less than secondary. The variables age and age squared are both centered at the sample minimum, 27 years old. Dummy variables are used to control for the effects of sex and place of residence (Moscow, another large city, town, or rural village). Economic branch of employment is measured using six aggregated categories: industry (including transport and communications), agriculture (including fishing and forestry), services (including trade), the ‘‘cognitive’’ branch (science, health, education, and culture), state administration and finance, and ‘‘other.’’ Private sector employment is captured by a dummy variable which equals one for those employed in cooperatives, privately owned firms, privatized firms, joint ventures, or foreign-owned firms. Class is specified using an adaptation of the Erikson and Goldthorpe (1992) schema to Russian circumstances (see Gerber and Hout, 1998): Managers and professionals are distinguished (into classes Ia/IIa and Ib/IIb, respectively) and all proprietors—here defined as respondents who said they are self-employed in a managerial or professional occupation—are combined into a single class (IV). In addition to class, I control for the effects of occupational status, as measured by the International Socio-Economic Index (ISEI) score (Ganzeboom, De Graaf, Treiman, and de Leeuw, 1992) of the respondent’s occupation (centered at 43, the sample mean). Controlling for both class and occupational status helps account for the possibility that former Party members earn more because they have higher status occupations within class categories or are in better rewarded classes within status ranks. Finally, I included an interaction between private sector employment and class Ib/IIb (professionals)

7 I also applied the same analyses as those presented herein to total monthly income—i.e., the sum of the incomes respondents reported from their main job and all other sources. All differences in results using total income as the dependent variable turned out to be trivial, so I present only the results for earnings from main job.

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to test the claim derived from ‘‘market transition theory’’ (Nee, 1989, 1991, 1996) that returns to human capital should be greater in the private sector.8 Equation (1) helps determine whether the differences in mean income between Party and non-Party members can be attributed to compositional differences with respect to these observed determinants of income. The covariates control for the influence of differences in human capital on Party members’ advantages, at least to the extent that human capital is accurately measured by education, age, occupational class, and ISEI. The data do not contain measures of social capital, so this variable cannot be controlled. Thus, a significant ‘‘residual’’ return to Party [net of the controls in (1)] could represent the effects of social capital or of unmeasured individual-level attributes that also facilitated selection into the Party. The ANACOVA model offers no way to control for the effects of selection bias on the measured effects of Party membership and no means to test H3. ESRs, which simultaneously model the sorting of persons into discrete positions and the effects of position and other variables on outcomes, are well suited for this purpose.9 They are especially useful in situations where unmeasured determinants of position are also likely to influence outcomes—a situation that arises, for example, in the study of the effects of tracking on educational attainment (Gamoran and Mare, 1989). In this type of situation, the selection mechanism biases OLS estimates of the effect of position on outcome, with the direction of the bias depending on the sign of the correlation between the errors associated with the selection process and the outcomes. We begin with an extension of the basic ANACOVA model that allows the effects of X on Y to depend on Party membership (M ):10 K

Y1i ⫽

兺␤

1k Xki

⫹ ⑀1i

(2)

2k Xki

⫹ ⑀2i ,

(3)

k⫽0 K

Y2i ⫽

兺␤ k⫽0

8 Gerber and Hout (1998) derive hypotheses applying market transition theory to Russia and find little support for the argument that marketization increases returns to education. I do not include all their interaction terms among control variables because the purpose of the current paper is more narrow—to test the effects of Party membership on income. Also, some of the interactions cannot be estimated for the Party member subsample due to sparse data. Gerber and Hout did not control for the effects of Party membership in their analysis. Thus, it is of interest to see whether their main finding—that returns to education and professional class position are, if anything, lower in the private sector—can be replicated when Party membership is controlled. A single interaction between private sector employment and professional class accomplishes this purpose parsimoniously. 9 Mare and Winship (1988) provide a thorough exposition of endogenous switching models. Winship and Mare (1992) describe a number of substantive applications. 10 This extension is justified by the hypothesis that the effects of some of the variables do vary by Party membership, which is validated below (see Footnote 19).

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where Y1 and Y2 denote (logged) earnings for Party members and non-Party members (positions 1 and 2, respectively), the ␤1k and ␤2k are estimated separately for each group, ␤10 and ␤20 denote intercepts, and the ⑀1i and ⑀2i are stochastic disturbances. Next, we specify a model for a latent variable, Zi, which indexes the probability of becoming a Party member, so that P(M ⫽ 1) ⫽ P(Zi ⬎ 0). Adopting the notation of Mare and Winship (1988), this extension can be written as K

Zi ⫽

兺␥ X k

ki

⫹ ␩1Y1i ⫹ ␩2Y2i ⫹ ␨i ,

(4)

k⫽0

where ␩1, ␩2, and ␥k are parameters (including an intercept, ␥0 ) and ␨ denotes a stochastic disturbance we assume to be uncorrelated with ⑀1i and ⑀2i in Eqs. (2) and (3). We incorporate the dependent variables in Eqs. (2) and (3) as independent variables in the selection model because the income returns to Party members and nonmembers enter into the selection process. Individuals weigh the anticipated income returns to Party membership against the costs. Party officials weigh the presumed productivity, drive, and performance of candidates—all unmeasured factors which, we can assume, are subsequently correlated with income—in deciding whom to invite to join.11 To facilitate estimation and interpretation, we follow the customary practice of rewriting Eq. (4) in its reduced form: K

Zi ⫽

兺␲ X k

ki

⫹ ⑀3i ,

(5)

k⫽0

where, from Eqs. (2) and (3), ␲k ⫽ ␩1␤1k ⫹ ␩2␤2k ⫹ ␥k and ⑀3i ⫽ ␩1⑀1i ⫹ ␩2⑀2i ⫹ ␨i. The regressors in Eq. (5) are as follows: a dummy variable equalling 1 if at least one parent of the respondent was a Party member; parent’s education in years and ISEI score when respondent was 14; dummy variables for college degree, 11 Equation (4) is appropriate even though neither individuals nor Party officials could anticipate the collapse of the Soviet Union and the potential income returns to Party membership in the post-Soviet context. So long as relative earnings in the Soviet context are highly correlated with relative earnings in the post-Soviet context, we can take the actual returns to Party membership in the post-Soviet period as a reasonable proxy for the returns in the Soviet context. The model does not assume perfect information. Nor does it assume perfect foresight. The model assumes only that the same observed and unobserved variables during the selection process also shape income in 1993. Surely most Russians were aware that joining the Party would yield material benefits. From the individual’s perspective, the issue was one of how to weigh those benefits against the perceived cost of joining the Party. Hence the argument that the primary unobserved variables were most likely drive, ambition, opportunism, etc., since these are all factors that would lead to a greater weight on the material and career rewards which Party membership offered. But the selection process was never a simple one-sided choice: the choices of Party officials loom even larger as factors influencing selection, and undoubtedly family members and peer influences could play a part as well. ESRs do not require a one-sided choice process (Mare and Winship, 1988, p. 135). Complex selection mechanisms such as that governing Party membership—or secondary school track assignment (Gamoran and Mare, 1989)—can readily be accommodated.

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MEMBERSHIP BENEFITS OR SELECTION EFFECTS?

secondary education, and woman; and age.12 This specification of Eq. (5) implies that the likelihood of becoming a member was shaped primarily by parental Party affiliation, social origin, educational attainment, and demographic factors.13 ESRs permit insights into the influence of unmeasured factors on both selection into the Party and earnings in summer 1993. These factors are captured by the disturbances ⑀1, ⑀2, and ⑀3 in (2), (3), and (5), which are assumed to be trivariate normal, each with constant variance. Although ␨ is uncorrelated with ⑀1 and ⑀2, the reduced form disturbance ⑀3 may be correlated with the disturbances in the outcome equation: hence the selection bias implicit in OLS estimates of (2) and (3). If the unmeasured determinants of Party membership (⑀3 ) are correlated with the unmeasured determinants of income for Party members (⑀1 ) and non-Party members (⑀2 ), then OLS estimates of the effects of Party membership and of the other Xk on income are inconsistent. The expected earnings for person i if they joined the Party (i.e., if Zi ⬎ 0) or did not join the Party (Zi ⬍ 0) are given by, respectively, K

E(Y1i 0 Zi ⬎ 0) ⫽

兺␤

⫹ (␴13/␴3 ) 5[␾(Zˆi )]/[⌽(Zˆi )]6

(6)

⫺ (␴23/␴3 ) 5[␾(Zˆ )]/[1 ⫺ ⌽(Zˆi )]6,

(7)

1k Xki

k⫽0

and K

E(Y2i 0 Zi ⬍ 0) ⫽

兺␤

2k Xki

k⫽0

where ␾ denotes the normal probability density function, ⌽ the cumulative normal probability function, and ␴13 and ␴23 denote the covariances of the disturbances ⑀1 and ⑀2 with ⑀3.15 Equations (6) and (7) show that the earnings associated with Party membership and nonmembership depend upon the measured independent variables and position-specific regression coefficients (⌺␤ikXk ) and, in addition, the expected 12 Parent’s education and ISEI are the respondent’s father’s unless either piece of information is missing, in which case the mother’s scores are used for both. It may seem preferable to use respondent’s education at the time of joining the Party rather than at the time of participating in the survey for the selection model. However, Party officials undoubtedly considered not only the previously attained level of education, but also the anticipated final educational attainment of prospective members. Moreover, it is unclear what the ‘‘education at the time of joining’’ would be for those never joined the Party. 13 ESRs do not require that the observed regressors in the selection model (5) are the same as those in the outcome models (2 and 3). In fact, when the regressors are the same, multicollinearity can pose a serious problem in the estimation of (5). See Stolzenberg and Relles (1997) for a discussion of this and other issues in relation to Heckman’s model for correcting sample selection bias, of which endogenous switching regressions are an extension. In the current application, it makes theoretical sense that the effects of social origin variables (parental Party membership, education, and occupational status) on current earnings operate only indirectly through respondents’ education, occupational attainment, and Party membership. These variables can be safely excluded a priori from the earnings models. 14 Equations (6) and (7) are presented by Mare and Winship (1988, p. 139). For more details, see Maddala (1983, chap. 9).

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THEODORE P. GERBER

value of the unmeasured characteristics, given by the second term on the righthand side of each equation. The amount of bias in the OLS estimates depends on the magnitude of this latter quantity. The Xk are the same regressors as those in the OLS models. Estimates of the probability of membership, represented as ␭1k ⫽ ␾(zˆ)/⌽(zˆ) for Party members (Z ⬎ 0) and, for nonmembers, ␭2k ⫽ ⫺␾(zˆ)/[1 ⫺ ⌽(zˆ)], are derived from the selection model (Eq. 5). Since ␴3 is unidentified, we set it to 1 by convention. For the unrestricted endogenous switching model we obtain parameter estimates for ␲k, ␤1k, ␤2k, ␴1, ␴2, ␴13, and ␴23.15 The last two parameters indicate whether and how selection effects influence the earnings of Party members and nonmembers. The remaining parameters capture the influence of the other regressors on earnings, net of selection effects. ESRs permit H3 to be tested. Significant estimates of ␴13 and/or ␴23 imply that unmeasured variables which influenced selection into the CPSU also influence earnings in post-Soviet Russia, net of the other covariates. To the extent that social capital inherited from the Soviet era accounts for Party members’ advantage, this will show up as differences in the intercepts and the effects of other covariates, net of the effects of selection, that work to the advantage of Party members. RESULTS Descriptive statistics for the entire valid sample and for Party members and nonmembers (Table 1) show that on average former Party members earned 7503 rubles—or 28.8%—more than nonmembers in summer 1993. This differential may result from compositional differences regarding observed determinants of income: Party members are substantially more likely to hold college degrees, to be male, and to be managers and professionals. Their average ISEI score is nine points higher than the average for nonmembers. OLS estimates of Eq. (1) offer a good initial test of whether the observed differences in mean earnings stem mainly from this type of observed compositional difference (Table 2).16 Although the effect is weaker than the observed difference in mean incomes, Party membership significantly affects expected (logged) earnings, net of the effects of other variables. Exponentiating the metric coefficient of .105, we see that Party members earn 11.1% more than non-Party members, holding the other variables in the model constant. This component of Party members’ advantage cannot be attributed to differences in human capital, at least insofar as human capital is captured by the covariates in (1). The pattern of sex, age, education, economic branch, and class effects in Table 2 closely replicates the pattern found by Gerber and Hout (1998), except that class 15 All models presented in this paper were estimated using LIMDEP 7.0 (Greene 1994). LIMDEP provides Full Information Maximum Likelihood estimates of (5)–(7). LIMDEP obtains starting values from a two-stage estimation procedure, where (5) is first estimated and then Zˆi is computed, saved, and used to estimate (6) and (7). LIMDEP returns ␳13 and ␳23, which are readily converted into the covariances using ␴1 and ␴2 since ␴3 ⫽ 1. 16 To simplify the analysis, stabilize estimates (especially in the Party subsample, which contains only 343 observations), and facilitate computation of expected incomes based on the ESRs, I removed all nonsignificant effects from the income models.

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MEMBERSHIP BENEFITS OR SELECTION EFFECTS? TABLE 1 Descriptive Statistics, Russians Over 26 and Currently Employed in 1993 Entire sample

Party members

Non-Party members

Variables

Mean

SD

Mean

SD

Mean

SD

Party member Income from main job (rubles/month) Log (income from main job) Parent Party member Parent’s education (years) Parent’s status (ISEI score) Education VUZ degree (complete tertiary) Secondary (including tekhnikum) Vocational (PTU) Less than secondary Age Woman Residence Moscow Other city Rural village Town Socioeconomic status (ISEI score) Employed in private sector Adapted Erikson–Goldthorpe class Ia/IIa. Managers Ib/IIb. Professionals IIIa. Upper routine nonmanual IIIb. Lower routine nonmanual IV. Proprietors V. Technicians, foremen, nurses VI. Skilled manual VIa. Semi- and unskilled (industry) VIIb. Semi- and unskilled (agriculture) Industrial branch Agriculture Industry Services Education, health, science, culture Financial services/state organs Other N

.13 26983.51 9.95 .23 7.97 37.54

.33 24002.49 .70 .42 3.85 16.61

1.00 33546.08 10.17 .38 8.02 38.47

.00 28465.87 .71 .49 4.15 18.08

.00 26042.96 9.92 .21 7.96 37.41

.00 23147.84 .69 .41 3.81 16.39

.16 .42 .23 .18 42.33 .49

.37 .49 .42 .39 9.69 .50

.37 .36 .17 .11 45.61 .32

.48 .48 .37 .32 9.82 .47

.14 .43 .24 .20 41.86 .52

.34 .50 .43 .40 9.58 .50

.07 .43 .30 .20 43.08 .10

.26 .49 .46 .40 16.83 .30

.07 .44 .26 .23 50.96 .11

.26 .50 .44 .42 17.47 .31

.07 .43 .31 .20 41.96 .10

.26 .49 .46 .40 16.44 .30

.06 .18 .04 .15 .01 .09 .25 .22 .01

.23 .38 .21 .36 .09 .28 .44 .41 .10

.16 .27 .07 .06 .01 .07 .21 .12 .02

.37 .45 .25 .24 .09 .25 .41 .33 .14

.04 .16 .04 .16 .01 .09 .26 .23 .01

.20 .37 .20 .37 .09 .28 .44 .42 .10

.16 .45 .11 .19 .05 .03 2443

.37 .50 .32 .39 .22 .17

.15 .46 .08 .19 .09 .02 343

.36 .50 .27 .39 .29 .15

.17 .45 .12 .19 .05 .03 2100

.37 .50 .32 .39 .21 .17

Note. Sample is weighted. Missing cases are excluded listwise.

Ia/IIa (managers) are not found in the current study to have significantly higher incomes, net of the other effects. This discrepancy probably stems from the fact that the earlier study did not control for ISEI score.17 Contrary to the predictions 17 The net effects of residence reported here for the entire sample and for non-Party members differ substantially from those reported by Gerber and Hout (1998), which conform to the effects reported here for Party members. However, none of the hypotheses tested in the present study or by Gerber and Hout pertain to the net effects of residence on earnings.

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THEODORE P. GERBER TABLE 2 Ordinary Least Squares Regression Models for (Logged) Income from Main Occupation

Entire sample

Party members

Non-Party members

Variables

B

t

B

t

B

t

Constant Woman Age (minus 27) Age (minus 27) squared a Education (less than secondary) VUZ degree Secondary/vocational Residence (Moscow) Other city Town Rural village Economic branch (industry, services, state/finance, other) Agriculture Education, health, science, culture Private sector ISEI (minus 43) a EG classes (Ia/IIa, V, VIIa, VIIb) Ib/IIb. Professionals IIIa. Upper routine nonmanual IIIb. Lower routine nonmanual IV. Proprietors VI. Skilled manual Party member

9.841 ⫺.251 .025 ⫺.095

139.6 ⫺8.7 5.3 ⫺7.5

10.370 ⫺.280 .012 ⫺.086

49.5 ⫺3.7 0.9 ⫺2.4

9.801 ⫺.248 .024 ⫺.092

129.9 ⫺7.9 4.9 ⫺6.7

.235 .061

4.4 1.8

.230 .097

1.7 0.8

.230 .061

3.9 1.7

.216 .175 .147

4.2 3.1 2.6

⫺.066 ⫺.119 ⫺.449

⫺0.5 ⫺0.8 ⫺2.9

.252 .210 .217

4.5 3.5 3.6

⫺.221 ⫺.112 .113 .762

⫺5.2 ⫺3.0 2.6 5.8

⫺.077 .145 .116 .752

⫺0.7 1.5 1.0 2.3

⫺.223 ⫺.139 .106 .808

⫺4.9 ⫺3.5 2.2 5.6

⫺.210 .136 ⫺.262 .581 .065 .105

⫺3.9 2.1 ⫺6.2 3.9 1.9 2.6

⫺.201 .364 ⫺.297 .267 .138

⫺1.8 2.6 ⫺2.0 0.7 1.4

⫺.218 .098 ⫺.259 .610 .050

⫺3.5 1.3 ⫺5.8 3.8 1.4

Adjusted R 2 N

.197 2443

.284 343

.177 2100

Note. The source of these data is General Population Survey, ‘‘Social Stratification in Eastern Europe After 1989.’’ Sample is weighted. Missing cases are excluded listwise. a Coefficient multiplied by 100 to show significant digits.

of market transition theory, Russian professionals earn significantly less than members of other classes with the same ISEI score, and the interaction between private sector employment and professional status is negative and nonsignificant (and therefore removed from the model).18 The separate regressions for Party and non-Party members suggest that the effects of age, residence, economic branch, and class position differ somewhat 18 In the separate regressions the interaction is positive for Party members and negative for nonmembers in the separate regression. But in neither case is the effect statistically significant, and including it changes the estimates of the main effect of private sector in the two groups. Other estimates are not affected. To save space and avoid misleading interpretations based on nonsignificant effects, I do not present the models including the interaction. They are available upon request.

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MEMBERSHIP BENEFITS OR SELECTION EFFECTS?

among the two groups.19 Surprisingly, in light of Rona-Tas’ (1994) finding that former cadres are more successful entrepreneurs in Hungary, proprietorship brings lower returns for Party members than nonmembers in Russia. However, Party members in ‘‘upper’’ routine nonmanual occupations (class IIIa—e.g., customs agents, bookkeepers, wholesale sales representatives) earn significantly more than non-Party members in the same class. The earnings of this class grew relative to the earnings of all other classes except Proprietors between 1991 and 1995 (Gerber and Hout, 1998). The difference in the intercepts in the separate models for Party and non-Party members corresponds to the difference in expected incomes of hypothetical members and nonmembers who score zero on all the remaining variables: 27-year-old Muscovite men who did not complete high school and held statesector jobs in industry as, say, technicians with ISEI scores of 43. The expected earnings of Party members with these characteristics exceeded those of non-Party members by 75.8%. The OLS results in Table 2 contradict H1 and confirm H2: in summer 1993 there remains a ‘‘return’’ to membership in the Communist Party of the Soviet Union, even though the Party itself no longer exists in any recognizable form.20 Shorn of an institutional basis, this advantage stems either from the disproportionate share of social capital that Party members may have inherited from their institutionally privileged position in Soviet society, or from selection effects— unobserved attributes conducive both to joining the Party earlier and earning more now. The ESRs provide insight into which of these scenarios is more plausible (testing H3). To see how selection shapes the effects of Party membership, we turn to the FIML parameter estimates for Eqs. (5)–(7). All the regressor variables in the probit model except parent’s education significantly affect the likelihood of selection into the Party. As expected, the offspring of Party members, those with college degrees, men, and those in older cohorts are all more likely to have been members of the Communist Party. The negative coefficients for parental education and status must be viewed in light of the positive association between these variables and parental Party membership, which implies positive indirect effects on the probability of Party membership for respondents. The negative direct effects of parental status and education reflect, on the one hand, the Party’s reluctance to recruit the offspring of the intelligentsia, other things being equal, 19 A ␹2 test showed that separate regressions for Party members and nonmembers fit the data better than a single regression; that is, at least some of the effects on earnings differ for members and nonmembers. The single-regression model is equivalent to separate regressions estimated with the constraints ␤1k ⫽ ␤2k for k ⬎ 0. These constraints increase the ⫺2 log-likelihood statistic by 34.268, a significant deterioration in model fit with 17 df ( p ⫽ .013). 20 Of course, the CPSU has several offshoots, for example, the Communist Party of Russia, which currently enjoys a plurality of seats in the State Duma of the Russian Federation. But none of these latter day Communist parties are at all comparable to the CPSU in terms of their size and influence over the social, economic, and political life of the country.

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THEODORE P. GERBER

and, on the other, the reluctance of intelligentsia progeny to join an organization devoted to avowedly ‘‘proletarian’’ values. Unobserved variables that increase the likelihood of selection into the Party have a positive effect on earnings. This is clear from the statistical significance of ␳13, which implies that ␴13 ⫽ .320. Individuals who actually joined the Party during the Soviet era earn more during the post-Soviet era than would a random sample of individuals with the same values on the covariates had they joined the Party. However, the effect of unobserved variables correlated with selection out of the Party on earnings is small (␴23 ⫽ ⫺0.050) and not statistically significant. These results indicate that selection into the Party dominates the process. Selection out of the Party is not based on unobserved variables that, in turn, influence earnings (net of the other covariates).21 The effects of ␴13 and ␴23 imply that OLS estimates of the effects of the other covariates on earnings are unbiased for nonmembers, but biased for Party members. The degree of bias can be determined by comparing the OLS estimates in Table 2 to the FIML estimates in the fuller specification (Table 3). The factors omitted from the OLS results suppress the effects of sex and education among Party members. Controlling for the effects of unmeasured variables that also influence selection into the Party, the coefficient for ‘‘woman’’ changes from ⫺0.280 to ⫺0.400, the coefficient for tertiary education from .230 to .429, and that for secondary or vocational education from .097 to .127. Among Party members the variables which lead to greater income are negatively correlated with college-level education and positively correlated with female sex. Most importantly, controlling for ␴13 reduces the estimate of the constant for Party members so that it does not differ statistically from the estimate for nonmembers.22 The data support H3: the observed net income advantage of Party members detected by the OLS results stems entirely from the unmeasured attributes which distinguish members from nonmembers and also contribute to higher earnings. Net of selection effects, Party members and nonmembers who scored zero on all covariates—namely, 27-year-old Muscovite men with less than

21 It may seem logically contradictory that selection into the Party is based on unmeasured factors that also influence post-Soviet earnings, while selection out of the Party is not. This scenario is entirely plausible, though, because the proportion of former Party members in the overall population is small enough that they can differ significantly from the overall mean on the unobserved factors while non-Party members do not. To see this, compare the Party means, non-Party means, and overall means on the observed variables (Table 1). Thus, a person randomly drawn from the overall population earns no more or less by not having joined the Party than a person with the same values on all other covariates randomly selected from the subsample who actually did not join the Party. 22 In the model presented in Table 3 the constants for Party members and nonmembers were constrained to be equal. Without the constraint, the Party constant is estimated at 9.400, the non-Party constant at 9.806. However, this difference was not statistically significant: the equality constraint increased ⫺2 log-likelihood by only .954 while consuming one df ( p ⫽ .329). The equality constraint not only fits the data, but leads to a less extreme selection effect (␳13 ⫽ .647 in the unconstrained model).

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MEMBERSHIP BENEFITS OR SELECTION EFFECTS? TABLE 3 Full Information Maximum Likelihood Estimates of Reduced Form Parameters for Party Membership and Regression Coefficients for Income

Entire sample

Party members

Variables

⌸

z

␤1k

Constant Parent CP member Parent’s status Parent’s education (years) Woman Age (minus 27) Age (minus 27) squared b Education (less than secondary) VUZ degree Secondary/vocational Residence (Moscow) Other city Town Rural village Economic branch (Industry, services, state/finance, other) Agriculture Education, health, science, culture Private sector ISEI (minus 43) b EG classes (Ia/IIa, V, VIIa, VIIb) Ib/IIb. Professionals IIIa. Upper routine nonmanual IIIb. Lower routine nonmanual IV. Proprietors VI. Skilled manual ␴1 ␳13 (⫽␴13 /␴1 ) ␴2 ␳23 (⫽␴23 /␴2 ) N

⫺1.254 .446 ⫺.008 ⫺.018 ⫺.486 .018

⫺8.7 4.8 ⫺2.7 ⫺1.3 ⫺6.6 4.3

9.794 a

1.007 .303

9.1 3.5

a b

2443

Non-Party members

z

␤2k

z

131.5

9.794 a

131.5

⫺.400 .016 ⫺.081

⫺4.2 1.2 ⫺2.4

⫺.253 .025 ⫺.093

⫺6.8 5.0 ⫺6.4

.429 .127

3.2 1.0

.248 .066

3.1 1.7

⫺.083 ⫺.143 ⫺.493

⫺0.7 ⫺1.1 ⫺3.2

.258 .216 .224

4.7 3.6 3.8

⫺.037 .145 .108 .864

⫺0.2 1.4 1.0 2.3

⫺.222 ⫺.139 .106 .807

⫺5.0 ⫺3.5 2.5 5.7

⫺.231 .368 ⫺.273 .163 .134 .644 .497

⫺1.8 2.7 ⫺1.3 0.2 1.2 13.8 4.1

⫺.218 .100 ⫺.258 .613 .052

⫺3.7 1.6 ⫺5.8 5.2 1.4

343

.626 61.8 ⫺.080 ⫺0.3 2100

Parameters constrained to be equal. Coefficient multiplied by 100 to show significant digits.

secondary, employed in state industry as, say, semiskilled workers with ISEI scores of 43—would have the same expected earnings. Because some of the covariates interact with Party membership, especially once selection effects are controlled, certain combinations of values on the covariates may produce higher returns for Party members apart from selection effects. To assess whether selection effects or compositional differences on observed variables account for the observed earnings advantage of Party mem-

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THEODORE P. GERBER

bers, it is useful to calculate the expected earnings of Party members and nonmembers with different characteristics, using Eqs. (6) and (7) and the corresponding formulas for the ‘‘hypothetical’’ outcomes—i.e., the expected earnings of Party members if they had not joined the Party and of nonmembers had they joined the Party (Mare and Winship, 1988, p. 141): K

E(Y2i 0 Zi ⬎ 0) ⫽

兺␤

⫹ (␴23/␴3 ) 5[␾(Zˆi )]/[⌽(Zˆi )]6

(8)

⫺ (␴13/␴3 ) 5[␾(Zˆi )]/[1 ⫺ ⌽(Zˆi )]6.

(9)

2k Xki

k⫽0

and K

E(Y1i 0 Zi ⬍ 0) ⫽

兺␤

1k Xki

k⫽0

The expected (logged) earnings of different groups of Party members and nonmembers confirm that selection is the sole source of Party members’ advantages (Table 4). To flesh out the pattern of effects, we present the expected values for each group in the positions in which they are actually observed and their hypothetical values had they been to be assigned to the other group. We decompose the overall expected values (Table 4C) into components attributable to the observed (Table 4A) and unobserved (Table 4B) variables.23 We consider five sets of values on Xk: the overall sample means, the modal values for Party and non-Party members (means for continuous covariates), hypothetical ‘‘elite’’ values (30-year-old male Muscovites with tertiary degrees working as managers in private services, ISEI ⫽ 71), and hypothetical ‘‘disadvantaged’’ values (55-yearold female village residents with less than secondary education working as unskilled laborers in state agriculture, ISEI ⫽ 34).24 We set zˆ at ⫺1.27, the expected value obtained by substituting the sample means into our estimates for Eq. (5). Absent the effects of selection, Party members would not earn more—and might even earn less—than non-Party members with the same values on the Xk (Table 4A). Compositional differences in the measured variables do not account for the earnings advantage enjoyed by Party members: using the Party modes 23 The entries in Table 4A are obtained by substituting the appropriate X into ⌺␤ X (for those k 1k k observed in the Party) or ⌺␤2kXk (for those not observed in the Party), using the estimates of ␤1k and ␤2k from Table 3. They represent the component of expected (logged) earnings that stems from the observed variables. The entries in Table 4B are obtained by calculating the quantities ␴13␭1, ␴23␭2, ␴13␭2, and ␴23␭1. These latter terms in Models (6)–(9) represent the component of expected (logged) earnings for each group that stems from the effects of unmeasured variables that also influence selection into the Party. The entries in Table 4C represent total expected (logged) earnings for each combination of observed covariates, which are obtained by adding the appropriate entries from A and B. 24 The sample means provide a reasonable picture of the ‘‘average’’ effects of covariates and selection, but since most of the variables are nominal, we obtain more realistic examples with combinations of hypothetical categorical values. The ISEI scores for the ‘‘elite’’ and ‘‘disadvantaged’’ groups are the sample means for the assigned class category.

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MEMBERSHIP BENEFITS OR SELECTION EFFECTS? TABLE 4 Decomposition of Expected (Logged) Incomes for Party and Non-Party Members a X⫽ A. Component due to positionspecific regression coefficients (Party effects) 1. ⌺␤1x, Member, observed in Party 2. ⌺␤2x, Nonmember, not observed in Party 3. ⌺␤1x, Nonmember, if observed in Party 4. ⌺␤2x, Member, if not observed in Party B. Component due to selection effects (z-hat ⫽ ⫺1.27) 1. ␴13␭1 (Member, observed in Party) 2. ␴23␭2 (Nonmember, not observed in Party) 3. ␴13␭2 (Nonmember, observed in Party) 4. ␴23␭1 (Member, not observed in Party) C. Total expected (logged) income 1. E(Y), Member, observed in Party 2. E(Y), Nonmember, not observed in Party 3. E(Y), Nonmember, if observed in Party 4. E(Y), Member, if not observed in Party

Sample means

Party modes

Non-CP modes

‘‘Elite’’ categories

‘‘Low-status’’ categories

9.51

9.98

9.61

10.61

8.31

9.95

10.29

10.07

10.44

9.18

9.51

9.98

9.61

10.61

8.31

9.95

10.29

10.07

10.44

9.18

0.56

0.56

0.56

0.56

0.56

0.01

0.01

0.01

0.01

0.01

⫺0.06

⫺0.06

⫺0.06

⫺0.06

⫺0.06

⫺0.09

⫺0.09

⫺0.09

⫺0.09

⫺0.09

10.07

10.54

10.17

11.17

8.87

9.96

10.30

10.08

10.45

9.19

9.45

9.92

9.55

10.55

8.25

9.86

10.20

9.99

10.35

9.10

a Based on coefficients in Table 3. Sample means are given in Table 1, modes are as follows: ‘‘Party,’’ 46-year-old man, VUZ degree, other city, professional in state industry, ISEI ⫽ 51; ‘‘non-Party,’’ 42-year-old woman, secondary degree, other city, skilled worker in state industry, ISEI ⫽ 42; ‘‘Elite,’’ 30-year-old man, VUZ degree, Muscovite, manager in private services, ISEI ⫽ 71; and ‘‘Low-status,’’ 55-year-old woman, less than secondary, village, lower nonmanual in state agriculture, ISEI ⫽ 34.

instead of the non-Party modes has only a trivial impact on the gap in expected earnings. The gap disappears for elites, but for Russians with the least advantageous values on the covariates, Party membership leads to substantially lower earnings (again, net of the selection effects). Table 4B shows that selection effects clearly work to the benefit of Party members. The positive sign of ␴13 renders the quantity (␴13/␴3 ) (␭1 ) positive for

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Party members. The .56 increment added to the logged earnings of Party members by their (average) unobserved attributes corresponds to a 75.1% increase in earnings over what they would be without the selection effect. In the hypothetical case where an individual with the typical unobserved characteristics of Party members did not enter the Party, there would be a small (and nonsignificant) negative return to those characteristics (see row 4 in Table 4B). The unobserved determinants of Party membership have almost no effect on the earnings of nonmembers, whether or not they joined the Party. Except for those with ‘‘elite’’ characteristics, they would be worse off if they had joined the Party, due to the different returns to the characteristics represented by the other covariates. The selection effects that work to benefit of Party members more than offset any potential negative returns to Party membership as such (Table 4C). For most combinations of Xk—especially for elites—Party members do much better than they would had they not been in the Party, even though a comparison of ⌺␤1kXk and ⌺␤2kXk would suggest otherwise. Lower status Russians would not necessarily do better by having joined the Party, reflecting the strong negative effects of female sex and rural resistance for Party members, which more than offset the positive selection effect. Nonmembers would fare rather worse if they had been Party members, since they would not accrue the returns to their unmeasured attributes that compensate for the lower ⌺␤1kXk they would experience as former Party members. Thus, even though ␴23 is trivial, the Party selection process had the (surely unintended) effect of optimizing the postsocialist incomes of Party members and non-Party members alike. DISCUSSION OLS results appear to confirm that the institutional legacy of the Soviet system bears a weighty, ghost-like influence on stratification processes in post-Soviet Russian. As of summer 1993 Party members enjoyed continuing material advantages which, if the OLS assumptions regarding the disturbances hold, can only be attributed to some form of residual membership benefit—probably social capital. The ESRs reveal a strikingly different picture. Russians who belonged to the CPSU do indeed earn more than Russians who did not, even though the institutional environment has changed. But the earnings of Party members exceed those of non-Party members due not to membership benefits (which would show up as consistently larger quantities in row 1 than in row 2 of Table 4A) but to selection effects. Former Party members as a group have distinctive unobserved attributes which cannot be reduced to measured traits such as human capital, demographic characteristics, and occupation. These latent attributes increased their likelihood of being invited to join and in fact joining the Party under the old regime. The same characteristics lead to enhanced material standing, even after 1991, when the institutional basis for that advantage was removed. Of course, the type of statistical analysis presented here cannot definitively establish the precise nature of those unobserved characteristics. It seems likely

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that such individual attributes as ambition, career-mindedness, a willingness to submit to organizational discipline, a penchant for organizational and administrative work, and perhaps what might be termed ‘‘opportunism’’ may characterize Party members.25 These attributes are just as readily translated into material advantage in market institutional contexts as in the institutional context of the Soviet Union. As discussed earlier, studies of post-Communist elite reproduction generally attribute elites’ capacity to maintain their privileged position to their supposedly superior social capital [or what Hanley et al. (1995) confusingly call ‘‘political capital’’], their valuable personal contacts cultivated through the Party (Rona-Tas, 1994; Borocz and Rona-Tas, 1995; Hanley et al., 1995). The analysis presented here casts doubt on whether superior social capital explains the advantage of Party members (as distinguished from elites). Upon reflection, this should not be so surprising. Party membership was a mass phenomenon, embracing almost 10% of the Soviet adult population, including individuals from all social strata. A large proportion of 19.2 million CPSU members could hardly derive sufficient social capital from their Party membership to account for the aggregate income differences. In Soviet-type societies, not only Party members, but most citizens relied heavily on personal networks to obtain material and occupational advantages. Elites were distinguished from the population less by the degree of their embeddedness than by the level of the distribution system at which they were embedded. The observed effects of Party membership on income could stem mainly from the overrepresentation of elites among former Party members: this would support the ‘‘social embeddedness’’ interpretation. However, the data indicate otherwise: the income advantage of rank-and-file Party members exceeds that of Party members who held office (results not shown, available upon request). Furthermore, to the extent that personal networks influence income (as opposed to other benefits), they probably operate largely via class (including access to managerial authority and entrepreneurial opportunities), occupational status, and employment in the private sector. These factors are all controlled in the models presented above. Finally, even if disproportionate access to lucrative social networks arguably accounts for some of income advantage enjoyed by former Party members after the collapse of Communism, the issue remains of how these networks influenced selection into the Party. If individuals perceived access to lucrative networks as an incentive to join the Party this does not preclude their differentially weighing the value of such access based on their level of ambition, opportunism, and so forth. The endogeneity of selection into the Party stems from the perceptions of potential members that Party membership would increase their earnings, as well as the consideration of Party officials that inductees would perform well in their 25 Social–psychological variables might be included in the earnings function to test these hypotheses about the attributes which distinguished Party members from nonmembers and, at the same time, lead to higher income, net of the standard variables. At present, we do not have the data required to estimate such detailed models.

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jobs (and thus attain higher earnings). If enhanced opportunity to accrue valuable social capital mediated the link between Party membership and increased earnings, this does not invalidate the hypothesis that similar unobserved attributes favored both selection into the Party and earnings in post-Soviet Russia. Membership in the Communist Party of the Soviet Union is best viewed as a proxy for unobserved—and perhaps unobservable—individual traits which lead to higher income in the diverse institutional contexts of state-socialist and market-type systems. Given the early stage of the reform process in Russia at the time the data were collected, it remains an open question whether these attributes will be as highly rewarded if and when a full-blown market system is in place. More recent—perhaps future—data are needed to do more than speculate on this issue. In addition, data from the Soviet era might be used to access whether Party members’ income advantages also stemmed primarily from self-selection in the state socialist institutional context. In the meantime, we must rely on what data we have. The analyses of these data presented here tell an unambiguous and plausible story. Many individuals can effectively resist the tyranny of institutions: they adroitly circumvent whatever new institutions come their way. Students of stratification should themselves resist attributing stratification outcomes solely to institutionalized advantages and disadvantages. The debate over market transition has foregrounded critical issues of how to characterize the institutions of former state socialist societies and how the posited institutional configurations shape stratification outcomes. Without gainsaying the importance of institutional analysis, we should nonetheless recognize that some individuals may have attributes that help them succeed—or, for that matter, fail—regardless of institutional setting. REFERENCES Aslund, A. (1995). How Russia Became a Market Economy, Brookings, Washington, DC. Bian, Y., and Logan, J. R. (1996). ‘‘Market transition and the persistence of power,’’ American Sociological Review 61, 739–757. Blasi, J. R., Kroumova, M., and Kruse, D. (1997). Kremlin Capitalism: Privatizing the Russian Economy, ILR Press, Ithaca. Borocz, J., and Akos, R.-T. (1995). ‘‘Small leap forward: Emergence of new economic elites,’’ Theory and Society 24, 751–781. Clarke, S. (1995). ‘‘Formal and informal relations in Soviet industrial production,’’ in Management and Industry in Russia: Formal and Informal Relations in the Period of Transition, S. Clarke (Ed.), Edward Elgar, pp. 1–27, Brookfield, VT. Erikson, R., and Goldthorpe J. H. (1992). The Constant Flux: A Study of Class Mobility in Industrial Societies, Oxford Univ. Press, New York. Flakierski, H. (1993). Income Inequalities in the Former Soviet Union and its Republics, Sharpe, Armonk, NY. Fligstein, N. (1996). ‘‘The economic sociology of the transitions from socialism,’’ American Journal of Sociology 101, 1074–81. Gamoran, A., and Mare, R. D. (1989). ‘‘Secondary school tracking and educational inequality: Compensation, reinforcement, or neutrality?’’ American Journal of Sociology 94, 1146–1183. Ganzeboom, H. B. G., De Graaf, P. M., Treiman, D. J., and de Leeuw, J. (1992). ‘‘A standard international socio-economic index of occupational status,’’ Social Science Research 21, 1–56.

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