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Economics and Politics of Russian Bankruptcies

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  • E. Zhuravskaya
  • K. Sonin

Abstract

Laws that work well in developed market economies may produce unexpected outcomes in a corrupt environment. Once a legal institution is formally in place, it might be subverted by those who control its day-to-day operations. This paper focuses on the institution of bankruptcy to provide a case study of institutional subversion in a transition economy. The firm-level data analysis shows that Russia's bankruptcy law of 1998 did not result in improving managerial budget constraint. Instead of removing weak management and closing down loss-making enterprises as intended, it initiated a wave of inefficient property redistribution controlled by regional political elites.

Suggested Citation

  • E. Zhuravskaya & K. Sonin, 2004. "Economics and Politics of Russian Bankruptcies," Voprosy Ekonomiki, NP Voprosy Ekonomiki, issue 4.
    • Handle: RePEc:nos:voprec:y:2004:id:1886
    DOI: 10.32609/0042-8736-2004-4-118-135
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