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Trapped in Informality: The Big Role of Small Firms in Russia’s Statist-patrimonial Capitalism

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  • Alexandra Vasileva

Abstract

Manifestations of patrimonialism such as corruption and state predation on business are widespread in many emerging economies. This paper presents the case of Russian political economy, dubbed ‘statist-patrimonial capitalism’, which is marked by state threats to private property rights through bureaucratic extortion or legal harassment. How can we explain the resilience of Russia’s statist-patrimonial capitalism? Predominant accounts focus on the lack of institutional constraints on state predation. The paper offers a different perspective by exploring the often-overlooked contribution of small- and medium-sized enterprises (SMEs). First, statistical data show a steady rise of SMEs in the 2000s despite increasing state predation, suggesting that SMEs are not simply subjugated by the state. Second, in-depth interviews with Russian entrepreneurs reveal that business contributes to the maintenance of the statist-patrimonial system through the mechanism of the ‘informality trap’: firms that choose the informal strategy have difficulties to return to the legal sphere and get stuck in informality. The drivers of informality include firm-specific characteristics, institutional factors and socio-cultural factors dubbed ‘normality’. The mechanism of the ‘informality trap’ highlights the agency of firms in corrupt polities and may be applicable to other emerging economies.

Suggested Citation

  • Alexandra Vasileva, 2018. "Trapped in Informality: The Big Role of Small Firms in Russia’s Statist-patrimonial Capitalism," New Political Economy, Taylor & Francis Journals, vol. 23(3), pages 314-330, May.
  • Handle: RePEc:taf:cnpexx:v:23:y:2018:i:3:p:314-330
    DOI: 10.1080/13563467.2017.1349090
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