Rackets, Regulation, and the Rule of Law
AbstractGovernments that levy predatory regulation and provide few weak legal institutions draw businesses into the unofficial economy and compel them to hire private protection organizations. Based on a survey of shopkeepers in three cities in Russia, we find that retail shops face very high levels of predatory regulation and have frequent contacts with private protection rackets. In addition, we show that higher levels of regulation are associated with weaker legal institutions and a higher probability of contact with a private protection organization. We also find that shopkeepers view private protection organizations primarily as a substitute for state-provided police protection and state-provided courts. These results emphasize the importance of public sector reform as a component of economic transition. Copyright 2000 by Oxford University Press.
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Bibliographic InfoArticle provided by Oxford University Press in its journal Journal of Law, Economics and Organization.
Volume (Year): 16 (2000)
Issue (Month): 2 (October)
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Other versions of this item:
- Timothy Frye & Ekaterina Zhuravskaya, 2000. "Rackets, Regulation and the Rule of Law," Working Papers w0002, Center for Economic and Financial Research (CEFIR).
- Frye, Timothy & Zhuravskaya, Ekaterina, 2001. "Rackets, Regulation and the Rule of Law," CEPR Discussion Papers 2716, C.E.P.R. Discussion Papers.
- H39 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Other
- K20 - Law and Economics - - Regulation and Business Law - - - General
- K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
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