Testing Russia's Virtual Economy
AbstractIn the aftermath of sovereign default of August 1998, the hypothesis of virtual economy in Russia developed by Gaddy and Ickes has gained popularity. The hypothesis states that the country has not moved towards free-market economy but developed a system of implicit price subsidization similar to what had existed before. Non-viable sectors that the state supported with subsidies before survive by over-pricing their output. Customers pass the bill back to the government by reducing their tax liabilities. We test the proposition that the distribution of the value-added across sectors is biased because of price distortions and estimate the distribution at world prices. The results support the claim that Russian price structure is different from the world level and three out of fifteen sectors, for which we construct price indices, become "value-destroying". We investigate the reasons behind price differentials and find that difference in processing and the use of barter explain a large part of it.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number 428.
Date of creation: 01 Dec 2001
Date of revision:
Contact details of provider:
Postal: 724 E. University Ave, Wyly Hall 1st Flr, Ann Arbor MI 48109
Phone: 734 763-5020
Fax: 734 763 5850
Web page: http://www.wdi.umich.edu
More information through EDIRC
Russia; virtual economy; virtual value-added;
Find related papers by JEL classification:
- P2 - Economic Systems - - Socialist Systems and Transition Economies
- P3 - Economic Systems - - Socialist Institutions and Their Transitions
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Daniel Berkowitz & David DeJong, 2001.
"Policy Reform and Growth in Post-Soviet Russia,"
William Davidson Institute Working Papers Series
405, William Davidson Institute at the University of Michigan.
- Mathilde Maurel, 2001. "Investment, Efficiency, and Credit Rationing: Evidence from Hungarian Panel Data," William Davidson Institute Working Papers Series 403, William Davidson Institute at the University of Michigan.
- Richard B. Goud Jr., 2002. "Inter-Firm Non-Monetary Transactions in Russia: A Literature Review," Development and Comp Systems 0207001, EconWPA.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Laurie Gendron).
If references are entirely missing, you can add them using this form.