nep-cis New Economics Papers
on Confederation of Independent States
Issue of 2007‒09‒16
eight papers chosen by
Anna Y. Borodina
Perm State University

  1. Transition in FSU and sub-Saharan countries: The role of institutions By Laurila , Juhani
  2. A Model of Russia’s "Virtual Economy" By Ericson, R. E.; Ickes , B. W.
  3. The Dynamics of Moonlighting: What is happening in the Russian informal economy? By Guariglia, Alessandra; Kim , Byung-Yeon
  4. Federal state shareholdings in Russian companies: Origin, forms and consequences for enterprise perfomance By Muravyev , Alexander
  5. Pricing global and local sources of risk in Russian stock market By Saleem, Kashif; Vaihekoski, Mika
  6. A Tale of Two City-States; Novgorod and Pskov in the 1990s By Solanko, Laura
  7. Too little Destruction too little Creation: A Schumpeterian Diagnosis of Barriers to Sustained Growth in Ukraine By Christian Gianella; William Tompson
  8. Sequential reform strategy: The case of Azerbaijan By Laurila, Juhani; Singh , Rupinder

  1. By: Laurila , Juhani (BOFIT)
    Abstract: This study compares transition processes in countries of Central and Eastern Europe, the former Soviet Union (FSU) and sub-Saharan Africa. By widening the scope from most- to least-developed transition economies, the study establishes the importance of a strong state with evolved institutional capacity to protect citizens, enforce property rights and generate social capital. The evidence presented further argues that enforceable, credible property rights with associated market discipline are among the best antidotes to corruption, shadow economies, criminal injustice and poverty. The presence of accountable institutions also influences economic growth and the ability of a country to attract trade and foreign direct investment. Consequently, when institutions of FSU and sub-Saharan countries develop to the point they become attractive to traders and investors from rich countries, their governments need to focus on abolition of barriers to trade, investment and capital. The author commends the recent reorientation of the international donor community towards encouraging recipient governments to commit credibly to increasing capacities of their state institutions with a view to supporting property-based rule of law and social order.
    Date: 2007–09–12
  2. By: Ericson, R. E. (BOFIT); Ickes , B. W. (BOFIT)
    Abstract: 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 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.
    Keywords: Russia; quasi-market sytem; virtual economy
    Date: 2007–09–13
  3. By: Guariglia, Alessandra (BOFIT); Kim , Byung-Yeon (BOFIT)
    Abstract: This paper uses rounds 5 to 8 of the Russian Longitudinal Monitoring Survey (RLMS) to analyse the dynamics of moonlighting of working-age population. We find that moonlighting is transitory, and is generally associated with career shifts. Those respondents who expressed a desire to switch jobs in the past are in fact more likely to moonlight in the present, and to effectively switch jobs in the future. The career shifts tend to be towards self-employed activities. These results imply that the Russian secondary labour market, as part of the informal economy, can provide long-term benefits for the economy as an effective incubator for setting up new self-employed businesses.
    Keywords: moonlighting; informal economy; labour supply
    Date: 2007–09–12
  4. By: Muravyev , Alexander (BOFIT)
    Abstract: This paper studies the impact of federal state shareholdings on the performance of Russian companies. It differs from most similar studies in two respects. Firstly, it focuses on mixed ownership companies rather than conventional state enterprises. Secondly, it distinguishes between several types of federal state shareholdings, namely elected blocks, residual blocks (which may be held by two bodies with different functions – the Ministry for State Property and the Russian Fund for Federal Property) and golden shares. The paper describes the origin of federal state shareholdings and discusses their possible implications for company performance. Econometric analysis shows that companies with state ownership generally perform worse than the average firm in terms of labour productivity and profitability. However, there are remarkable differences in the performance of companies with different types of state shareholdings. Companies with residual blocks held by the Property Fund are the worst performers, followed by companies with residual blocks held by the Ministry for State Property. Companies with elected shareholdings as well as with golden shares do not differ from the average enterprises in the respective industries. These differences in performance are explained by the different degrees of control the federal state has over enterprises with various types of shareholdings – greater control is associated with better performance. The paper concludes that the government should avoid keeping equity stakes in companies unless there is a good reason to retain them. If the state wants to keep an ownership stake in a company, reliable control structures must be created. Finally, the issue of golden shares in strategically important companies seems to be a reasonable alternative to retaining some control over them through equity ownership.
    Keywords: corporate governance; state ownership; firm performance; Russia
    Date: 2007–09–12
  5. By: Saleem, Kashif; Vaihekoski, Mika
    Abstract: In this paper we study international asset pricing models and pricing of global and local sources of risk in the Russian stock market using weekly data from 1999 to 2006. In our empirical specification, we utilize and extend the multivariate GARCH-M framework of De Santis and Gérard (1998), by allowing conditional local influence as well. Similar to them we find global risk to be time-varying. Currency risk also found to be priced and highly time varying in the Russian market. Moreover, our results suggest that the Russian market is partially segmented and local risk is also priced in the market. The model also implies that the biggest impact on the US market risk premium is coming from the world risk component whereas the Russian risk premium is on average caused mostly by the local and currency risk components.
    Keywords: international asset pricing models; segmentation; currency risk; multivariate GARCH-M; Russia
    JEL: G15 G12
    Date: 2007–09–10
  6. By: Solanko, Laura (BOFIT)
    Abstract: This paper examines two regions of the Russian Federation, Novgorod and Pskov, to compare how differences in economic policy affect economic development. Despite common histories, geography and natural resources, Novgorod committed early on to policies that would attract foreign investments in production. Pskov, on the other hand, withdrew into protectionist policies until it was clear that efforts to increase domestic and foreign investment levels were needed. Using available statistics, we consider the reasoning that led these regions down such distinctly different economic policy paths – and consequences of these choices.
    Keywords: Russia; regions; Novgorod; Pskov
    Date: 2007–09–13
  7. By: Christian Gianella; William Tompson
    Abstract: This paper examines problems of entry, exit and competition in Ukrainian product markets. It finds that Ukraine still has too little of all three, and that exit mechanisms, in particular, function poorly. Since impediments to entry and exit are largely the product of excessive and ill administered regulation, the paper also provides a systematic assessment of product-market regulation in Ukraine, using indicators developed by the OECD Economics Department. Finally, the paper presents the main findings of two empirical studies concerned with the potentially large benefits of opening up markets, via both increased competition and further privatisation, for productivity growth in Ukraine. This paper relates to the 2007 Economic Survey of Ukraine ( <P>Une insuffisance de création-destruction : un diagnostic schumpétérien des freins à la croissance en Ukraine <BR>Cet article examine les questions de concurrence, d’entrée et de sortie des entreprises sur le marché des biens. Il montre que toutes trois demeurent insuffisantes en Ukraine, et que les mécanismes de sortie du marché, en particulier, fonctionnent de manière très imparfaite. Compte tenu du fait que les barrières à l’entrée et à la sortie sont largement le produit d’une réglementation excessive et mal appliquée, l’article donne une évaluation systématique du niveau de réglementation du marché des biens en Ukraine, en utilisant les indicateurs développés par le Département des affaires économiques. Enfin, l’article expose les principaux résultats de deux études empiriques évaluant les effets bénéfiques sur la croissance de la productivité de l’ouverture des marchés, d’une part par un accroissement de la concurrence et d’autre part par la poursuite des privatisations. Ce document se rapporte à l’Etude économique de l’Ukraine 2007 (
    Keywords: product market regulation, competition, privatisation, réglementation sur les marchés des biens et du travail, concurrence, restructuring, restructuration, privatisation, entry, exit, Ukraine, Ukraine, creative destruction, destruction créatrice, entrée sur le marché, sortie sur le marché
    JEL: D24 D43 H11 L1 L5 L9 O12 P23
    Date: 2007–09–03
  8. By: Laurila, Juhani (BOFIT); Singh , Rupinder (BOFIT)
    Abstract: The aim is to review transition literature for evidence that supports sequential reform strategy, as presented in this report. The second part discusses the findings in the context of Azerbaijan, a formerly socialist transition economy with interesting initial conditions. Evidence of the country's current need to focus on improving public services fits well with the sequential reform view. The authors argue that constraints captured by initial conditions (human resources, administrative capacities, traditions, etc.) necessitate sequencing of reforms and outline general aspects of a sequential reform strategy designed to expedite the transition process. The literature survey supports the Washington Consensus recommendations for starting transition with macroeconomic reforms, but over time initial conditions inevitably constrain and necessitate sequencing. In other words, reform efforts initially need to be directed across the widest possible front, but later in transition the emphasis of reform efforts needs to shift from one area to another. In the later stages, emphasis needs to be laid on improvement of public sector governance to support and promote macroeconomic reforms and formation of a healthy corporate sector. Democratic institutions arise with economic growth generated by the corporate sector.
    Keywords: transition economics; sequencing; governance; macroeconomic reforms; structural reforms; private sector; democracy; Azerbaijan
    JEL: F35 K40 N00 P20 P30
    Date: 2007–09–13

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