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The informal economy and the growth of small enterprises in Russia

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  • Byung-Yeon Kim
  • Youngho Kang

Abstract

This article uses Russian regional data to estimate the determinants of the informal economy and to examine the relationship between the informal economy and the growth of legally registered small private enterprises during the transition period. After obtaining an estimate of the size of the informal economy in each Russian region from 1992 to 1999, an analysis is performed to find whether reform progress and institutional qualities account for the informal economy. An evaluation of the links between the informal economy and the growth of small enterprises within Russia is then carried out. The findings suggest that Russia's informal economy resulted from a delay in reform and low qualities of institutions. It was found that the growth of small enterprises is positively affected by the informal economy. These results imply that the informal economy helped entrepreneurial activities to grow in the face of government failure, but these informal activities tend to become official over time. Copyright (c) 2009 The Authors. Journal compilation (c) 2009 The European Bank for Reconstruction and Development.

Suggested Citation

  • Byung-Yeon Kim & Youngho Kang, 2009. "The informal economy and the growth of small enterprises in Russia," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 17(2), pages 351-376, April.
  • Handle: RePEc:bla:etrans:v:17:y:2009:i:2:p:351-376
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    References listed on IDEAS

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    Cited by:

    1. Alexander Libman & Janis N. Kluge, 2017. "Sticks or Carrots? Comparing Effectiveness of Government Shadow Economy Policies in Russia," Working Papers 364, Leibniz Institut für Ost- und Südosteuropaforschung (Institute for East and Southeast European Studies).
    2. Shurchkov, Olga, 2012. "New elites and their influence on entrepreneurial activity in Russia," Journal of Comparative Economics, Elsevier, vol. 40(2), pages 240-255.
    3. Kim, Byung-Yeon, 2010. "Informal Economy Activities and Entrepreneurship in Russia," Proceedings of the German Development Economics Conference, Hannover 2010 55, Verein für Socialpolitik, Research Committee Development Economics.

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