Oligarchic Property Rights And The Transition To A Market Economy In Russia
AbstractWe present a model in which capital assets can only be owned by members of a small politically-connected elite ("the oligarchs"), each member of which faces a given risk of being expropriated, and we investigate the implications of such an imperfection of property rights for the transition to a market economy. At the start of the transition, the oligarchs are long on local capital assets but short on safe deposits abroad. This causes a depression phase characterized by acute liquidity constraints and large capital outflows at the same time. As the oligarchs acquire enough safe deposits, the economy enters a recovery phase, still accompanied by capital outflows. The model can explain both the steep decline suffered by the Russian economy in the first 7 years of the transition to a market economy and the subsequent turnaround without relying on external factors. The decline could be avoided by allowing foreigners to own some domestic capital assets but home-country oligarchs may not be able to credibly collectively commit to such a reform
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Bibliographic InfoPaper provided by Society for Economic Dynamics in its series 2006 Meeting Papers with number 288.
Date of creation: 03 Dec 2006
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Postal: Society for Economic Dynamics Christian Zimmermann Economic Research Federal Reserve Bank of St. Louis PO Box 442 St. Louis MO 63166-0442 USA
Web page: http://www.EconomicDynamics.org/society.htm
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oligarchies; property rights; transition economies; growth;
Find related papers by JEL classification:
- F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
- O10 - Economic Development, Technological Change, and Growth - - Economic Development - - - General
- P14 - Economic Systems - - Capitalist Systems - - - Property Rights
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