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Barter and non-monetary transactions in transition economies: Evidence from a cross-country survey

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Author Info

  • Wendy Carlin

    (University College London and WDI)

  • Steven Fries

    (European Bank for Reconstruction and Development)

  • Mark Schaffer

    (Heriot-Watt University and WDI)

  • Paul Seabright

    (University of Cambridge and CEPR)

Abstract

This paper reports the findings of a survey of more than 3,000 firms in 20 transition countries. It shows that barter and other non-monetary transactions (including the use of bills of exchange, debt swaps, barter chains, and the redemption of debt in goods) are an important phenomenon in Russia and Ukraine.Contrary to what is commonly believed, they are not negligible in central and eastern Europe. The causes and consequences vary significantly between countries, but several conclusions emerge strongly. First, barter and other non-monetary transactions are associated in all countries with financing difficulties for firms. They appear to be helping to assure liquidity in an environment in which contract enforcement (including tax enforcement) is uncertain. Second, the use of these mechanisms is not significantly related to the restructuring and performance of firms that use them in most countries except Russia. Third, in Russia and Ukraine the nature of non-monetary transacting is importantly different from elsewhere. It is much more associated than elsewhere with market power and limited trading networks. It is also more costly in terms of restructuring and performance. Firms that barter are less likely to improve their existing products, probably because barter enables them to dispose of otherwise unsaleable goods. They are also more likely to engage in internal reorganisation of a kind designed purely to service existing barter chains. Internal reorganisation is strongly associated with improved performance for firms that do not barter, but is unrelated to performance for firms that do. Overall, in Russia and to a lesser extent in Ukraine (but not elsewhere) the findings are consistent with the hypothesis that economic disorganisation, in the sense of Blanchard and Kremer (1997), means that barter and other non-monetary transactions are both more likely to occur and more damaging when they do occur.

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Bibliographic Info

Paper provided by European Bank for Reconstruction and Development, Office of the Chief Economist in its series Working Papers with number 50.

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Length: 17 pages
Date of creation: Jun 2000
Date of revision:
Handle: RePEc:ebd:wpaper:50

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Keywords: barter; transition;

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References

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  1. Marin, Dalia & Schnitzer, Monika, 2005. "Disorganization and financial collapse," Munich Reprints in Economics, University of Munich, Department of Economics 19258, University of Munich, Department of Economics.
  2. Kranton, Rachel E, 1996. "Reciprocal Exchange: A Self-Sustaining System," American Economic Review, American Economic Association, American Economic Association, vol. 86(4), pages 830-51, September.
  3. Blanchard, Olivier & Kremer, Michael, 1997. "Disorganization," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 112(4), pages 1091-1126, November.
  4. Prendergast, Canice & Stole, Lars, 2000. "Barter relationships," MPRA Paper 33400, University Library of Munich, Germany.
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Citations

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Cited by:
  1. Wladimir Andreff, 2004. "Would a Second Transition Stage Prolong the Initial Period of Post-socialist Economic Transformation into Market Capitalism?," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 1(1), pages 7-31, June.
  2. Kim, Byung-Yeon & Pirttilä, Jukka & Rautava, Jouko, 2001. "Money, Barter and Inflation in Russia," BOFIT Discussion Papers, Bank of Finland, Institute for Economies in Transition 15/2001, Bank of Finland, Institute for Economies in Transition.
  3. Marin, Dalia & Schnitzer, Monika, 1999. "Disorganization and Financial Collapse," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2245, C.E.P.R. Discussion Papers.
  4. Guriev, Sergei & Kvassov, Dmitri, 2004. "Barter for price discrimination," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 22(3), pages 329-350, March.
  5. Isabel Pla Julián, 2003. "Cambios institucionales en la economía rusa: de las reformas de mercado a la consolidación monetaria," Revista de Economía Institucional, Universidad Externado de Colombia - Facultad de Economía, Universidad Externado de Colombia - Facultad de Economía, vol. 5(8), pages 66-91, January-J.
  6. S.I. Boyarchenko & S.Z. Levendorskii, 2000. "Search-Money-and-Barter Models of Financial Stabilization," William Davidson Institute Working Papers Series 332, William Davidson Institute at the University of Michigan.
  7. Vasily Astrov & Korkut Boratav & Sandor Richter, 2002. "Monthly Report 05/2002," wiiw Monthly Reports, The Vienna Institute for International Economic Studies, wiiw 2002-05, The Vienna Institute for International Economic Studies, wiiw.
  8. Sergei Guriev & Igor Makarov & Mathilde Maurel, 2000. "Debt Overhang and Barter in Russia," William Davidson Institute Working Papers Series 339, William Davidson Institute at the University of Michigan.
  9. Jose Noguera & Susan Linz, 2003. "A Theoretical Model of Barter in Russia," CERGE-EI Working Papers wp207, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
  10. Antje Hildebrandt, 2002. "Too many to fail? Inter-enterprise arrears in transition economies," Development and Comp Systems 0212001, EconWPA.
  11. Hildebrandt, Antje, 2002. "Too many to fail? Inter-enterprise arrears in transition economies," BOFIT Discussion Papers, Bank of Finland, Institute for Economies in Transition 11/2002, Bank of Finland, Institute for Economies in Transition.
  12. Richard B. Goud Jr., 2002. "Inter-Firm Non-Monetary Transactions in Russia: A Literature Review," Development and Comp Systems 0207001, EconWPA.
  13. Vlad Ivanenko, 2004. "Access to liquidity and non-monetary trade in Russia," Post-Communist Economies, Taylor & Francis Journals, Taylor & Francis Journals, vol. 16(1), pages 21-38.
  14. Sergei Guriev & Dmitry Kvassov, 2000. "Price Discrimination Through Barter: A Theory and Evidence from Russia," Econometric Society World Congress 2000 Contributed Papers 0397, Econometric Society.

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