Escaping the Under-Reform Trap

Most former Soviet republics have fallen into an economic and political under-reform trap. An intrusive state imposes high tax rates and drives entrepreneurs into the unofficial economy, which further aggravates the pressure on official businessmen. Tax revenues and public goods dwindle, further reducing incentives to register business activity. This economic under-reform trap has a political counterpart. Remarkably, Communist parties remain popular and opposed to establishing the rule of law precisely in those places where they were able to delay and derail reform. No electoral backlash prompts the reforms necessary to leave the under-reform trap. The best way out of the trap in countries such as Russia and Ukraine is increased economic and political competition among the elite. Copyright 2002, International Monetary Fund

Ethnic Enclaves And The Economic Success Of Immigrants - Evidence From A Natural Experiment

Recent immigrants tend to locate in ethnic "enclaves" within metropolitan areas. The economic consequence of living in such enclaves is still an unresolved issue. We use data from an immigrant policy initiative in Sweden, when government authorities distributed refugee immigrants across locales in a way that we argue is exogenous. This policy initiative provides a unique natural experiment, which allows us to estimate the causal effect on labor market outcomes of living in enclaves. We find substantive evidence of sorting across locations. When sorting is taken into account, living in enclaves improves labor market outcomes for less skilled immigrants: the earnings gain associated with a standard deviation increase in ethnic concentration is 13 percent. Furthermore, the quality of the enclave seems to matter. Members of high-income ethnic groups gain more from living in an enclave than members of low-income ethnic groups. © 2001 the President and Fellows of Harvard College and the Massachusetts Institute of Technology