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Law in Transition and Development: The Case of Russia

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  • Marin, Dalia

Abstract

The rise of barter and non-cash payments has become a dominant feature of the Russian transition to a market economy. This paper confronts with empirical evidence two approaches to explain barter in Russia: the ’illusion view’ and the ’trust view’ of barter. The ’illusion view’ suggests that barter allows the parties to pretend that the manufacturing sector in Russia is producing value added by enabling this sector to sell its output at a higher price than its market value. The ’trust view’ sees barter as an institution to deal with the absence of trust and liquidity in the Russian economy. We confront the prediction of both explanations with actual data on barter in Ukraine in 1997. The data reject the ’illusion view‘ in favor of the ‘trust view‘ of barter.

Suggested Citation

  • Marin, Dalia, 2004. "Law in Transition and Development: The Case of Russia," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 78, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  • Handle: RePEc:trf:wpaper:78
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    File URL: https://epub.ub.uni-muenchen.de/13473/1/78.pdf
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    Keywords

    imperfect input and capital markets; the virtual economy; trade credit; trust; contract enforcement;

    JEL classification:

    • D20 - Microeconomics - - Production and Organizations - - - General
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • P30 - Economic Systems - - Socialist Institutions and Their Transitions - - - General

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