Transformational Decline and Preconditions of Growth in Russia
AbstractThe authors analyze the characteristics of recession, linking it with changes in economic agents' behavior after liberalization. They attach special importance to labor shifts between the "old" and the "new" sectors. Inter-sectoral shifts in Russia have been slowed down due to the practice of labor hoarding in the old sector. To explain these phenomena in the Russian economy the authors construct an equilibrium model of labor markets which assumes the existence of collectivist labor relations in the old sector. The results of their study show that both stronger personnel monitoring in enterprises with state and mixed ownership and the abolition of collectivist labor relations would have the effect of increasing labor productivity, reducing the gap between officially registered employment and actually used labor in the old sector, and leveling wage rates in the old and the new sectors. These measures might create the necessary preconditions for an upturn in the economy and long-term growth. The authors also consider a dynamic model which sees the shadow sector as concealed activities of firms working in the formal economy. Computer simulation of the model produced varying qualitative results depending on the selected parameters. The authors find that a reduction in the tax rate is crucial for increasing the official output.
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Bibliographic InfoPaper provided by EERC Research Network, Russia and CIS in its series EERC Working Paper Series with number 98-03e.
Length: 54 pages
Date of creation: 10 Jul 1998
Date of revision:
Contact details of provider:
Postal: EERC Research Network, Russia and CIS, 13, Yakira Str., suite 332, Kyiv, 04119 Ukraine
Web page: http://www.eerc.ru
Postal: EERC Research Network, Russia and CIS, 13, Yakira Str., suite 332, Kyiv, 04119 Ukraine
Find related papers by JEL classification:
- O17 - Economic Development, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
- P27 - Economic Systems - - Socialist Systems and Transition Economies - - - Performance and Prospects
- E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
- E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
- J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
This paper has been announced in the following NEP Reports:
- NEP-ALL-2000-07-27 (All new papers)
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