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Transformational Decline and Preconditions of Growth in Russia

Author

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  • Bouev Maxim

    ()

  • Matveenko Vladimir

    ()

  • Vostroknutova Ekaterina

    ()

Abstract

The authors analyze the characteristics of recession, linking it with changes in economic agents' behavior after liberalization. They attach special importance to labor shifts between the "old" and the "new" sectors. Inter-sectoral shifts in Russia have been slowed down due to the practice of labor hoarding in the old sector. To explain these phenomena in the Russian economy the authors construct an equilibrium model of labor markets which assumes the existence of collectivist labor relations in the old sector. The results of their study show that both stronger personnel monitoring in enterprises with state and mixed ownership and the abolition of collectivist labor relations would have the effect of increasing labor productivity, reducing the gap between officially registered employment and actually used labor in the old sector, and leveling wage rates in the old and the new sectors. These measures might create the necessary preconditions for an upturn in the economy and long-term growth. The authors also consider a dynamic model which sees the shadow sector as concealed activities of firms working in the formal economy. Computer simulation of the model produced varying qualitative results depending on the selected parameters. The authors find that a reduction in the tax rate is crucial for increasing the official output.

Suggested Citation

  • Bouev Maxim & Matveenko Vladimir & Vostroknutova Ekaterina, 1998. "Transformational Decline and Preconditions of Growth in Russia," EERC Working Paper Series 98-03e, EERC Research Network, Russia and CIS.
  • Handle: RePEc:eer:wpalle:98-03e
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Matveenko Vladimir & Saveliev Peter, 2005. "Labor Supply in Russia: Studying the Role of Outside Options of the Employed," EERC Working Paper Series 00-215e, EERC Research Network, Russia and CIS.
    2. Maxim Bouev, 2001. "Labor Supply, Informal Economy and Russian Transition," William Davidson Institute Working Papers Series 408, William Davidson Institute at the University of Michigan.
    3. Ekaterina Vostroknutova, 2003. "Shadow Economy, Rent-Seeking Activities and the Perils of Reinforcement of the Rule of Law," William Davidson Institute Working Papers Series 2003-578, William Davidson Institute at the University of Michigan.
    4. Maxim Bouev, 2004. "Diverging Paths: Transition in the Presence of the Informal Sector," William Davidson Institute Working Papers Series 2004-689, William Davidson Institute at the University of Michigan.
    5. Hillman, Arye L. & Ursprung, Heinrich W., 2000. "Political culture and economic decline," European Journal of Political Economy, Elsevier, vol. 16(2), pages 189-213, June.

    More about this item

    Keywords

    dynamics; transformational decline; shadow economy; sectoral shift of labor; wages differential;

    JEL classification:

    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • P27 - Economic Systems - - Socialist Systems and Transition Economies - - - Performance and Prospects
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand

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