Provincial Protectionism

In a federal state, political leaders of constituent units might protect their enterprises from the federal center (e.g., allowing them not to pay federal taxes). The effectiveness of such protection depends crucially on the ability of local authorities to extract rents from enterprises. They can easily do so, if there is a small number of enterprises with large employment, and local monopolies can be effectively sustained. They cannot do it so easily if regional industry is competitive, political opposition is strong, and the federal center has enough means to enforce payment of taxes. We build a simple model to argue that it is the industrial structure of constituent units that determines political relations between them and the federal center. The theory is supported by the recent experience of Russia, China, and Argentina.http://deepblue.lib.umich.edu/bitstream/2027.42/39942/3/wp557.pd

Regular cross sections of Borel flows

Any free Borel flow is shown to admit a cross section with only two possible distances between adjacent points. Non smooth flows are proved to be Lebesgue orbit equivalent if and only if they admit the same number of invariant ergodic probability measures.Comment: Minor improvements in expositio

Why the rich may favor poor protection of property rights

In unequal societies, the rich might benefit from shaping economic institutions into their favor. This paper analyzes the dynamics of institutional subversion focusing on one particular institution, public protection of property rights. If this institution is imperfect, agents have incentives to invest in private protection of property rights. With economies of scale in private protection, rich agents have a significant advantage: they could expropriate other agents using their private protection capacities. Ability to maintain private protection system makes the rich natural opponents of full protection of property rights provided by the state. Such an environment does not allow grass-roots demand to drive development of new market-friendly institutions (such as public protection of property rights). The economy as a whole is stuck in a ’bad’ long-run equilibrium with low growth rate, high inequality, and wide-spread rent-seeking. The Russian ‘oligarchs’ of 1990s, a handful of politically powerful agents that controlled large stakes of newly privatized property, we re the major motivation for this paper.http://deepblue.lib.umich.edu/bitstream/2027.42/39929/2/wp544.pd

The Evolution of Cross-Region Price Distribution in Russia

The behavior of the entire cross-section distribution of prices in Russian regions is analyzed from 1992 through 2000, using non-parametric techniques. The cost of a staples basket is used as a price representative. Price dispersion measured as the standard deviation of prices is found to be diminishing since about 1994; and the shape of the cross-region distribution of prices tends to be more regular over time. To characterize intra-distribution mobility, a transition probability function (stochastic kernel) is estimated. It is also used to derive a long-run limit of the price distribution. Overall, the results suggest that, excluding a few years following the price liberalization, price convergence has been happening among Russian regions.http://deepblue.lib.umich.edu/bitstream/2027.42/40102/3/wp716.pd

Goods Market Integration in Russia during the Economic Upturn

This paper obtains an evolving pattern of goods market integration in Russia, considering the period of economic upturn, since the second half of 2000 through the end of 2007. In an integrated market, the price of a tradable good at any location is determined by the national market, not local demand. Based on this, the strength of dependence of local prices on local demands is used to detect and measure market segmentation. The costs of a staples basket across almost all Russian regions with a monthly frequency are used as the empirical stuff. The pattern obtained suggests that in the time span under consideration the degree of Russiaís goods market integration was relatively stable, fluctuating around some level; no sufficient improvements or deteriorations were detected.http://deepblue.lib.umich.edu/bitstream/2027.42/64371/1/wp921.pd