A Note on Measuring the Unofficial Economy in the Former Soviet Republics

This note argues that the most commonly used estimates of the size of the unofficial economies in the former Soviet republics are flawed. Most important, they are based on calculations that disregard the variation in unofficial economic activity across space in the pre-transition Soviet Union. In addition, these estimates appear to understate the size of the unofficial economies in these countries. We propose alternative estimates and find that they are more strongly related to the institutional factors commonly used to explain the size of the unofficial sector. Our estimates also show that the size of a country's pre-transition unofficial economy is an important predictor of its size during the transition. This suggests that the size of the unofficial economy is to a large extent a historical phenomenon only partly determined by contemporary institutional factors.http://deepblue.lib.umich.edu/bitstream/2027.42/39820/3/wp436.pd

Income Distribution and Price Controls: Targeting a Social Safety Net During Economic Transition

During the ongoing post-communist economic transitions, the relative well-being of many people is changing rapidly, and governments are not well positioned to accurately measure individual living standards. Under such circumstances, continued price controls over basic consumer goods within the state sector, and the associated queuing, can form a serviceable device for targeting poor people for subsidies. With a fixed-price state sector and free-price parallel markets, rich people might choose to avoid queues and shop in the free markets, while poor people would prefer to pay low nominal prices and queue in the state sector. The targeting of subsidies through queues, therefore, can be accomplished even if the government has no information on individual income or living standards. When the alternative to price controls is a poorly targeted explicit social safety net, the resource cost of queues might be more than compensated for by an improvement in the targeting of subsidies.http://deepblue.lib.umich.edu/bitstream/2027.42/39665/3/wp281.pd

Income Distribution and Price Controls: Targeting a Social Safety Net During Economic Transition

During the ongoing post-communist economic transitions, the relative well-being of many people is changing rapidly, and governments are not well positioned to accurately measure individual living standards. Under such circumstances, continued price controls over basic consumer goods within the state sector, and the associated queuing, can form a serviceable device for targeting poor people for subsidies. With a fixed-price state sector and free-price parallel markets, rich people might choose to avoid queues and shop in the free markets, while poor people would prefer to pay low nominal prices and queue in the state sector. The targeting of subsidies through queues, therefore, can be accomplished even if the government has no information on individual income or living standards. When the alternative to price controls is a poorly targeted explicit social safety net, the resource cost of queues might be more than compensated for by an improvement in the targeting of subsidies.price controls, tax evasion, queue-rationing, economic transition, income distribution

Decentralization, Corruption, and the Unofficial Economy

We analyze the implications of decentralization for the incentives of local governments to provide productivity enhancing local public goods and extort bribes from local entrepreneurs. We show that an increase in the share of locally raised tax revenue left with the local government raises its incentives to provide public goods and brings more entrepreneurs into the official economy. Corruption, measured by the size of bribes that local officials charge entrepreneurs for issuing licenses for operating officially, may increase or decrease, depending on the extent to which public goods enhance the entrepreneur’s productivity. The tests using cross-sectional country-level data support the model’s implications.decentralization, local public goods, corruption, unofficial economy

The Natural Resource Curse and Economic Transition

Using cross-country regressions, we examine the relationship between “point-source” resource abundance and economic growth, quality of institutions, investment in human and physical capital, and social welfare (life expectancy and infant mortality). Contrary to most literature, we find little evidence of natural resource curse outside of the economies in transition. In the economies in transition, there is some evidence that natural resource wealth is associated with higher infant mortality. This negative effect, however, exists only relative to other resource rich countries. Compared to other economies in transition, natural resource abundant transitional economies are not worse off with respect to our indicators..

A Note on Measuring the Unofficial Economy in the Former Soviet Republics

This note argues that the most commonly used estimates of the size of the unofficial economies in the former Soviet Republics are flawed. Most important, they are based on calculations that disregard the variation in unofficial economic activity across space in the pre-transition Soviet Union. In addition, these estimates appear to understate the size of the unofficial economies in these countries. We propose alternative estimates and find that they are more strongly related to the institutional factors commonly used to explain the size of the unofficial sector. Our estimates also show that the size of a country's pre-transition unofficial economy is an important predictor of its size during the transition. This suggests that the size of the unofficial economy is to a large extent a historical phenomenon only partly determined by contemporary institutional factors.hidden economy, transition economies

A Note on Measuring the Unofficial Economy in the Former Soviet Republics

This note argues that the most commonly used estimates of the size of the unofficial economies in the former Soviet republics are flawed. Most important, they are based on calculations that disregard the variation in unofficial economic activity across space in the pre-transition Soviet Union. In addition, these estimates appear to understate the size of the unofficial economies in these countries. We propose alternative estimates and find that they are more strongly related to the institutional factors commonly used to explain the size of the unofficial sector. Our estimates also show that the size of a country's pre-transition unofficial economy is an important predictor of its size during the transition. This suggests that the size of the unofficial economy is to a large extent a historical phenomenon only partly determined by contemporary institutional factors.A Note on Measuring the Unofficial Economy in the Former Soviet Republics

Taxation and Evasion in the Presence of Extortion by Organized Crime

In pursuit of its transition from a command to a market economy, post-Soviet Russia has witnessed enormous regional differences in economic growth rates. Moreover, the economic reforms implemented under this transition, while initiated at the federal level, have also differed markedly across regions, as regional governments have had considerable discretion over the implementation of reform policies in their jurisdictions. We exploit these differences in analyzing whether regional differences in reform policies can account for regional differences in growth rates, and conclude that to a considerable degree, they can. Most notably, we find that local-government privatization initiatives and regional-government initiatives to gain control over their capital stock (e.g. plants, equipment, machinery and social infrastructure) exhibit close correspondence with the formation of new legal enterprises, which in turn exhibits close correspondence with economic growth.http://deepblue.lib.umich.edu/bitstream/2027.42/39641/3/wp256.pd