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Oligarchic Property Rights And The Transition To A Market Economy In Russia

Author

Listed:
  • Serguey Braguinsky

    () (SUNY Buffalo)

  • Roger Myerson

Abstract

We present a model in which capital assets can only be owned by members of a small politically-connected elite ("the oligarchs"), each member of which faces a given risk of being expropriated, and we investigate the implications of such an imperfection of property rights for the transition to a market economy. At the start of the transition, the oligarchs are long on local capital assets but short on safe deposits abroad. This causes a depression phase characterized by acute liquidity constraints and large capital outflows at the same time. As the oligarchs acquire enough safe deposits, the economy enters a recovery phase, still accompanied by capital outflows. The model can explain both the steep decline suffered by the Russian economy in the first 7 years of the transition to a market economy and the subsequent turnaround without relying on external factors. The decline could be avoided by allowing foreigners to own some domestic capital assets but home-country oligarchs may not be able to credibly collectively commit to such a reform

Suggested Citation

  • Serguey Braguinsky & Roger Myerson, 2006. "Oligarchic Property Rights And The Transition To A Market Economy In Russia," 2006 Meeting Papers 288, Society for Economic Dynamics.
  • Handle: RePEc:red:sed006:288
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    More about this item

    Keywords

    oligarchies; property rights; transition economies; growth;

    JEL classification:

    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • P14 - Economic Systems - - Capitalist Systems - - - Property Rights

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