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A note on measuring the unofficial economy in the former Soviet Republics1

Author

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  • Michael Alexeev
  • William Pyle

Abstract

This note argues that the most commonly used estimates of the size of the unofficial economies in the former Soviet republics are flawed. Most important, they are based on calculations that disregard the variation in unofficial economic activity across space in the pre‐transition Soviet Union. In addition, these estimates appear to understate the size of the unofficial economies in these countries. We propose alternative estimates and find that they are more strongly related to the institutional factors commonly used to explain the size of the unofficial sector. Our estimates also show that the size of a country's pre‐transition unofficial economy is an important predictor of its size during the transition. This suggests that the size of the unofficial economy is to a large extent a historical phenomenon only partly determined by contemporary institutional factors. JEL classification: O17, P2, P3.

Suggested Citation

  • Michael Alexeev & William Pyle, 2003. "A note on measuring the unofficial economy in the former Soviet Republics1," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 11(1), pages 153-175, March.
  • Handle: RePEc:bla:etrans:v:11:y:2003:i:1:p:153-175
    DOI: 10.1111/1468-0351.00143
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    More about this item

    JEL classification:

    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • P2 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies
    • P3 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions

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