Microeconomic Aspects of Economic Growth in Eastern Europe and the Former Soviet Union, 1950-2000

The theme of this paper is the microeconomics of economic growth in Central and Eastern Europe (CEE) and the Newly Independent States (NIS) over the period 1950-2000. The key structural change in this region is the end of the socialist regime in 1989 and 1992, and the subsequent attempt at transition to a market economy. We begin the paper with an examination of the key legacies from the socialist period. We then examine the key microeconomic actors in transition economies: households, enterprises, and government officials. Although there are many common processes at work, differences in economic performance tend to coincide with the geographical divide. Legacies play an important part. We also argue that differences in openness also plays an important role in generating different outcomes. These factors, combined with defects in the political and legal system, have given rise to a vicious circle of resistance to reform in the NIS.http://deepblue.lib.umich.edu/bitstream/2027.42/39732/3/wp348.pd

A Model of Russia's "Virtual Economy"

The Russian Economy has evolved into a hybrid form, a partially monetized quasi-market system that has been called the virtual economy. In the virtual economy, barter and non-monetary transactions play a key role in transferring value from the productive activities to the loss-making sectors of the economy. We show how this transfer takes place, and how it can be consistent with the incentives of economic agents. We analyze a simple partial-equilibrium model of the virtual economy, and show how it might prove an obstacle to industrial restructuring and hence marketizing transition.http://deepblue.lib.umich.edu/bitstream/2027.42/39701/3/wp317.pd

Stability and Disorder: An Evolutionary Analysis of Russia's Virtual Economy

The hybrid system that the Russian transition has evolved into has been called the virtual economy. This paper analyzes the evolution of the virtual economy. We pay particular attention to the interaction of economic reform policies and the adaptive behavior of enterprise directors. We then analyze the implications of the virtual economy for Russia's stability and development, and place the evolution of the virtual economy into the larger international security context.

Reputation and the Soft-Budget Constraint

We study the role of reputation in dealing with the soft-budget constraint. We examine whether the reputation of a borrower can lead to repayment in an environment where enforcement is weak. We also introduce lenders’ reputation and examine how this impacts on the allocation of borrowers. We find that reputation can harden budget constraint and improve welfare, although it can never fully eliminate softness. We also show that lenders who acquire a reputation for being tough can earn higher profits than lenders with reputations for being soft.

Microeconomic Aspects of Economic Growth in Eastern Europe and the Former Soviet Union, 1950-2000

The theme of this paper is the microeconomics of economic growth in Central and Eastern Europe (CEE) and the Newly Independent States (NIS) over the period 1950-2000. The key structural change in this region is the end of the socialist regime in 1989 and 1992, and the subsequent attempt at transition to a market economy. We begin the paper with an examination of the key legacies from the socialist period. We then examine the key microeconomic actors in transition economies: households, enterprises, and government officials. Although there are many common processes at work, differences in economic performance tend to coincide with the geographical divide. Legacies play an important part. We also argue that differences in openness also plays an important role in generating different outcomes. These factors, combined with defects in the political and legal system, have given rise to a vicious circle of resistance to reform in the NIS.

Russian Federation - The myth of monopoly : a new view of industrial structure in Russia

Discussion of economic reform in the Russian Federation is colored by the conventional view of Russia's industrial structure. Both in Russia and in the West, Russian industry is characterized as very large enterprises operating in highly concentrated industries. The authors challenge the conventional view. They assess Russian industrial concentration by comparing the Russian industrial structure (as revealed in the 1989 Soviet Census of Industry) with that in the United States and other countries. They find that very large firms are more prevalent in the United States than in Russia. This empirical fact suggests that planners economized on the costs of central economic coordination not by building unusually large enterprises, but by not building very small enterprises. Their most important finding: that there is little aggregate or industry concentration at the national level in Russia. Monopolies and oligopolies actually account for only a small share of national employment and production. Instead, barriers to competition in Russia arise as a result of highly segmented product markets. In large part, this segmentation can be viewed as a legacy of central planning. Under the prior regime, enterprises were highly isolated, divided alone both ministerial and geographical lines. Presently, these barriers are reinforced by some features of the transitional environment that continue to undermine the efficient distribution of goods. The authors conclude that the traditional policy remedies appropriate for problems of concentration (such as antitrust policy and import competition) may be ill-advised or inadequate for addressing problems of imperfect competition in the Russian economy. They argue instead that improving the distribution system and other market infrastructure that supports trade and facilitating the entry of new firms should be the most critical elements of competition policy in Russia.Microfinance,Small Scale Enterprise,Private Participation in Infrastructure,Banks&Banking Reform,Water and Industry

Stability and Disorder: An Evolutionary Analysis of Russia's Virtual Economy

The hybrid system that the Russian transition has evolved into has been called the virtual economy. This paper analyzes the evolution of the virtual economy. We pay particular attention to the interaction of economic reform policies and the adaptive behavior of enterprise directors. We then analyze the implications of the virtual economy for Russia's stability and development, and place the evolution of the virtual economy into the larger international security context.http://deepblue.lib.umich.edu/bitstream/2027.42/39660/3/wp276.pd

How important are future marine and shipping aerosol emissions in a warming Arctic summer and autumn?

Future sea ice retreat in the Arctic in summer and autumn is expected to affect both natural and anthropogenic aerosol emissions: sea ice acts as a barrier between the ocean and the atmosphere, and reducing it increases dimethyl sulfide and sea salt emissions. Additionally, a decrease in the area and thickness of sea ice could lead to enhanced Arctic ship traffic, for example due to shorter routes of cargo ships. Changes in the emissions of aerosol particles can then influence cloud properties, precipitation, surface albedo, and radiation. Next to changes in aerosol emissions, clouds will also be affected by increases in Arctic temperatures and humidities. In this study, we quantify how future aerosol radiative forcings and cloud radiative effects might change in the Arctic in late summer (July–August) and early autumn (September–October). Simulations were conducted for the years 2004 and 2050 with the global aerosol–climate model ECHAM6-HAM2. For 2050, simulations with and without additional ship emissions in the Arctic were carried out to quantify the impact of these emissions on the Arctic climate. In the future, sea salt as well as dimethyl sulfide emissions and burdens will increase in the Arctic. The increase in cloud condensation nuclei, which is due to changes in aerosol particles and meteorology, will enhance cloud droplet number concentrations over the Arctic Ocean (+10 % in late summer and +29 % in early autumn; in-cloud values averaged between 75 and 90∘ N). Furthermore, both liquid and total water path will increase (+10 % and +8 % in late summer; +34 % and +26 % in early autumn) since the specific humidity will be enhanced due to higher temperatures and the exposure of the ocean's surface. Changes in both aerosol radiative forcings and cloud radiative effects at the top of the atmosphere will not be dominated by the aerosol particles and clouds themselves but by the decrease in surface albedo (and by the increase in surface temperature for the longwave cloud radiative effect in early autumn). Mainly due to the reduction in sea ice, the aerosol radiative forcing will become less positive (decreasing from 0.53 to 0.36 W m−2 in late summer and from 0.15 to 0.11 W m−2 in early autumn). The decrease in sea ice is also mainly responsible for changes in the net cloud radiative effect, which will become more negative in late summer (changing from −36 to −46 W m−2). Therefore, the cooling component of both aerosols and clouds will gain importance in the future. We found that future Arctic ship emissions related to transport and oil and gas extraction (Peters et al., 2011) will not have a large impact on clouds and radiation: changes in aerosols only become significant when we increase these ship emissions by a factor of 10. However, even with 10-fold ship emissions, the net aerosol radiative forcing shows no significant changes. Enhanced black carbon deposition on snow leads to a locally significant but very small increase in radiative forcing over the central Arctic Ocean in early autumn (no significant increase for average between 75 and 90∘ N). Furthermore, the 10-fold higher ship emissions increase the optical thickness and lifetime of clouds in late summer (net cloud radiative effect changing from −48 to −52 W m−2). These aerosol–cloud effects have a considerably larger influence on the radiative forcing than the direct effects of particles (both aerosol particles in the atmosphere and particles deposited on snow). In summary, future ship emissions of aerosols and their precursor gases might have a net cooling effect, which is small compared to other changes in future Arctic climate such as those caused by the decrease in surface albedo

Global relevance of marine organic aerosol as ice nucleating particles

Ice nucleating particles (INPs) increase the temperature at which supercooled droplets start to freeze. They are therefore of particular interest in mixed-phase cloud temperature regimes, where supercooled liquid droplets can persist for extended periods of time in the absence of INPs. When INPs are introduced to such an environment, the cloud can quickly glaciate following ice multiplication processes and the Wegener–Bergeron–Findeisen (WBF) process. The WBF process can also cause the ice to grow to precipitation size and precipitate out. All of these processes alter the radiative properties. Despite their potential influence on climate, the ice nucleation ability and importance of different aerosol species is still not well understood and is a field of active research. In this study, we use the aerosol–climate model ECHAM6-HAM2 to examine the global relevance of marine organic aerosol (MOA), which has drawn much interest in recent years as a potentially important INPs in remote marine regions. We address the uncertainties in emissions and ice nucleation activity of MOA with a range of reasonable set-ups and find a wide range of resulting MOA burdens. The relative importance of MOA as an INP compared to dust is investigated and found to depend strongly on the type of ice nucleation parameterisation scheme chosen. On the zonal mean, freezing due to MOA leads to relative increases in the cloud ice occurrence and in-cloud number concentration close to the surface in the polar regions during summer. Slight but consistent decreases in the in-cloud ice crystal effective radius can also be observed over the same regions during all seasons. Regardless, MOA was not found to affect the radiative balance significantly on the global scale, due to its relatively weak ice activity and a low sensitivity of cloud ice properties to heterogeneous ice nucleation in our model

To Restructure or Not to Restructure: Informal Activities and Enterprise Behavior in Transition

We analyze the process of restructuring in Russia. The Russian economy is bifurcating as some enterprises restructure and reduce the distance to the market, while other enterprises exploit relationship capital to survive without restructuring. Survival in this environment depends on initial conditions and on investment in relations with officials. Enterprises can produce cash and non-cash goods, and this choice effects the survival possibilities in subsequent periods. Implications of the theory, with special reference to monetary policy, barter, intergovernmental fiscal relations, and Financial Industrial Groups, are discussed.