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Trust versus illusion: What is driving demonetization in the former Soviet Union?


  • Dalia Marin


The virtual economy argument for Russia suggests that barter allows the parties to pretend that the manufacturing sector is producing value added by enabling this sector to sell its output at a higher price than its market value. We confront this prediction with the actual pricing behaviour of industrial sectors in Ukraine in 1997. Based on the pricing data of 165 barter deals we find no systematic difference in the pricing behaviour in non-cash transactions across sectors. What appears to matter for the pricing behaviour is whether the firm is on the selling or buying end of the barter transaction. We offer a model that sees this pricing behaviour as a mechanism to deal with the absence of trust and liquidity in the economy.
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  • Dalia Marin, 2002. "Trust versus illusion: What is driving demonetization in the former Soviet Union?," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 10(1), pages 173-200, March.
  • Handle: RePEc:bla:etrans:v:10:y:2002:i:1:p:173-200

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    References listed on IDEAS

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    Cited by:

    1. Marin, Dalia & Schnitzer, Monika, 2005. "Disorganization and financial collapse," European Economic Review, Elsevier, vol. 49(2), pages 387-408, February.
    2. Minzyuk, Larysa, 2010. "The development of non-monetary means of payment," MPRA Paper 28167, University Library of Munich, Germany, revised 2010.
    3. 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 - Economics Institute, Prague.
    4. Jos?? Noguera & Susan J. Linz, 2005. "Barter, Credit, and Welfare: A theoretical inquiry into the barter phenomenon in Russia," William Davidson Institute Working Papers Series wp757, William Davidson Institute at the University of Michigan.
    5. Alexandra Gerbasi & Dominika Latusek, 2015. "Trust-building in international business ventures," Grenoble Ecole de Management (Post-Print) hal-01137667, HAL.

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