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Alternative Strategies For Firms In Oppressive And Corrupt States: Informality Or Formality Via Business Associations?

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  • JEFFREY B. NUGENT
  • GRIGOR. SUKIASSYAN

Abstract

"Firms operating in oppressive conditions such as those in the transition countries often take advantage of informality, making unofficial payments to officials and underreporting their sales for tax purposes. This paper argues that business associations may constitute a more transparent, efficient, and formal alternative. Empirical support for the argument is provided based on firm level data on several thousand firms from the Business Environment and Enterprise Performance Surveys in 25 transitions countries for 2002 and 2005. We show that, despite their often rather bad reputation, business associations tend to play a rather positive role, helping firms to reduce both having to make unofficial payments and underreporting of sales for tax purposes."("JEL" D2, D7, L2, P2, P3) Copyright (c) 2009 Western Economic Association International.

Suggested Citation

  • Jeffrey B. Nugent & Grigor. Sukiassyan, 2009. "Alternative Strategies For Firms In Oppressive And Corrupt States: Informality Or Formality Via Business Associations?," Contemporary Economic Policy, Western Economic Association International, vol. 27(4), pages 423-439, October.
  • Handle: RePEc:bla:coecpo:v:27:y:2009:i:4:p:423-439
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    References listed on IDEAS

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    1. Stanley Fischer & Ratna Sahay, 2000. "The Transition Economies After Ten Years," IMF Working Papers 00/30, International Monetary Fund.
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    7. Nauro Campos & Francesco Giovannoni, 2007. "Lobbying, corruption and political influence," Public Choice, Springer, vol. 131(1), pages 1-21, April.
    8. Sukiassyan, Grigor, 2007. "Inequality and growth: What does the transition economy data say?," Journal of Comparative Economics, Elsevier, vol. 35(1), pages 35-56, March.
    9. William Pyle, 2007. "Organized Business, Political Regimes and Property Rights across the Russian Federation," Middlebury College Working Paper Series 0703, Middlebury College, Department of Economics.
    10. Stanley Fischer & Ratna Sahay, 2000. "The Transition Economies After Ten Years," NBER Working Papers 7664, National Bureau of Economic Research, Inc.
    11. Sergio Godoy & Joseph Stiglitz, 2006. "Growth, Initial Conditions, Law and Speed of Privatization in Transition Countries: 11 Years Later," NBER Working Papers 11992, National Bureau of Economic Research, Inc.
    12. repec:hrv:faseco:30747190 is not listed on IDEAS
    13. James H. Anderson & Cheryl W. Gray, 2006. "Anticorruption in Transition 3 : Who is Succeeding... and Why?," World Bank Publications, The World Bank, number 7089, January.
    14. Doner Richard F. & Schneider Ben Ross, 2000. "Business Associations and Economic Development: Why Some Associations Contribute More Than Others," Business and Politics, De Gruyter, vol. 2(3), pages 1-29, December.
    15. Jan Hanousek & Filip Palda, 2004. "Quality of Government Services and the Civic Duty to Pay Taxes in the Czech and Slovak Republics, and other Transition Countries," Kyklos, Wiley Blackwell, vol. 57(2), pages 237-252, May.
    16. Doner, Richard F. & Schneider, Ben Ross, 2000. "Business Associations and Economic Development: Why Some Associations Contribute More Than Others," Business and Politics, Cambridge University Press, vol. 2(03), pages 261-288, November.
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    18. Pyle, William, 2007. "Organized business, political regimes and property rights across the Russian Federation," BOFIT Discussion Papers 18/2007, Bank of Finland, Institute for Economies in Transition.
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    Citations

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    Cited by:

    1. Jens Prüfer, 2016. "Business Associations and Private Ordering," Journal of Law, Economics, and Organization, Oxford University Press, vol. 32(2), pages 306-358.
    2. Ma, Guangrong & Rui, Oliver Meng & Wu, Yiping, 2015. "A springboard into politics: Do Chinese entrepreneurs benefit from joining the government-controlled business associations?," China Economic Review, Elsevier, vol. 36(C), pages 166-183.
    3. Andrei Govorun, 2013. "The choice of lobbying strategy: direct contacts with officials or mediation via business associations," HSE Working papers WP BRP 24/EC/2013, National Research University Higher School of Economics.

    More about this item

    JEL classification:

    • D2 - Microeconomics - - Production and Organizations
    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • P2 - Economic Systems - - Socialist Systems and Transition Economies
    • P3 - Economic Systems - - Socialist Institutions and Their Transitions

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