Law in Transition and Development: The Case of Russia
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 â€™illusion viewâ€™ and the â€™trust viewâ€™ of barter. The â€™illusion viewâ€™ 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 â€™trust viewâ€™ 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 â€™illusion viewâ€˜ in favor of the â€˜trust viewâ€˜ of barter.
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