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Barter and Non-Monetary Transactions in Transition Economies: Evidence from a Cross-Country Survey

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  • Wendy Carlin
  • Steven Fries
  • Mark Schaffer
  • Paul Seabright

Abstract

This paper reports the findings of a survey of more than 3,000 firms in 20 transition countries. It shows that barter and other non-monetary transactions (including the use of bills of exchange, debt swaps, barter chains, and the redemption of debt in goods) are an important phenomenon in Russia and Ukraine. Contrary to what is commonly believed they are not negligible in Central and Eastern Europe. The causes and consequences vary significantly between countries, but several conclusions emerge strongly. First, barter and other non-monetary transactions are associated in all countries with financing difficulties for firms. They appear to be helping to assure liquidity in an environment in which contract enforcement (including tax enforcement) is uncertain. Secondly, the use of these mechanisms is not significantly related to the restructuring and performance of firms that use them in most countries except Russia. Thirdly, in Russia and Ukraine the nature of non-monetary transacting is importantly different from elsewhere. It is much more associated than elsewhere with market power and limited trading networks. It is also more costly in terms of restructuring and performance. Firms that barter are less likely to improve their existing products, probably because barter enables them to dispose of otherwise unsaleable goods. They are also more likely to engage in internal reorganisation of a kind designed purely to service existing barter chains. Internal reorganisation is strongly associated with improved performance for firms that do not barter, but is unrelated to performance for firms that do. Overall, in Russia and to a lesser extent in Ukraine (but not elsewhere) the findings are consistent with the hypothesis that economic disorganisation, in the sense of Blanchard & Kremer (1997), means that barter and other non-monetary transactions are both more likely to occur and more damaging when they do occur.

Suggested Citation

  • Wendy Carlin & Steven Fries & Mark Schaffer & Paul Seabright, 2000. "Barter and Non-Monetary Transactions in Transition Economies: Evidence from a Cross-Country Survey," CERT Discussion Papers 0004, Centre for Economic Reform and Transformation, Heriot Watt University.
  • Handle: RePEc:hwe:certdp:0004
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    References listed on IDEAS

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    1. Marin, Dalia & Schnitzer, Monika, 2005. "Disorganization and financial collapse," European Economic Review, Elsevier, vol. 49(2), pages 387-408, February.
    2. Prendergast, Canice & Stole, Lars, 2000. "Barter relationships," MPRA Paper 33400, University Library of Munich, Germany.
    3. Olivier Blanchard & Michael Kremer, 1997. "Disorganization," The Quarterly Journal of Economics, Oxford University Press, pages 1091-1126.
    4. Kranton, Rachel E, 1996. "Reciprocal Exchange: A Self-Sustaining System," American Economic Review, American Economic Association, vol. 86(4), pages 830-851, September.
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    Cited by:

    1. Kobil Ruziev & Don Webber, 2017. "SMEs access to formal finance in post-communist economies: Do institutional structure and political connectedness matter?," Working Papers 20171701, Department of Accounting, Economics and Finance, Bristol Business School, University of the West of England, Bristol.
    2. Wladimir Andreff, 2004. "Would a Second Transition Stage Prolong the Initial Period of Post-socialist Economic Transformation into Market Capitalism?," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 1(1), pages 7-31, June.
    3. Hildebrandt, Antje, 2002. "Too many to fail? : Inter-enterprise arrears in transition economies," BOFIT Discussion Papers 11/2002, Bank of Finland, Institute for Economies in Transition.
    4. Guriev, Sergei & Makarov, Igor & Maurel, Mathilde, 2002. "Debt Overhang and Barter in Russia," Journal of Comparative Economics, Elsevier, pages 635-656.
    5. Guriev, Sergei & Kvassov, Dmitri, 2004. "Barter for price discrimination," International Journal of Industrial Organization, Elsevier, vol. 22(3), pages 329-350, March.
    6. Richard B. Goud Jr., 2002. "Inter-Firm Non-Monetary Transactions in Russia: A Literature Review," Development and Comp Systems 0207001, EconWPA.
    7. Vasily Astrov & Korkut Boratav & Sandor Richter, 2002. "Monthly Report 05/2002," wiiw Monthly Reports 2002-05, The Vienna Institute for International Economic Studies, wiiw.
    8. 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.
    9. Vlad Ivanenko, 2004. "Access to liquidity and non-monetary trade in Russia," Post-Communist Economies, Taylor & Francis Journals, vol. 16(1), pages 21-38.
    10. Antje Hildebrandt, 2002. "Too many to fail? Inter-enterprise arrears in transition economies," Development and Comp Systems 0212001, EconWPA.
    11. Sergei Guriev & Dmitry Kvassov, 2000. "Price Discrimination Through Barter: A Theory and Evidence from Russia," Econometric Society World Congress 2000 Contributed Papers 0397, Econometric Society.
    12. Isabel Pla Julián, 2003. "Cambios institucionales en la economía rusa: de las reformas de mercado a la consolidación monetaria," Revista de Economía Institucional, Universidad Externado de Colombia - Facultad de Economía, vol. 5(8), pages 66-91, January-J.

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