nep-cis New Economics Papers
on Confederation of Independent States
Issue of 2010‒05‒22
four papers chosen by
Koen Schoors
Ghent University

  1. Financial globalization and the Russian crisis of 1998 By Pinto, Brian; Ulatov, Sergei
  2. The limits of self-governance when cooperators get punished: Experimental evidence from urban and rural Russia By Simon Gaechter; Benedikt Herrmann
  3. A Structural Analysis of Contractual Innovations within the CIS Milk Industry By Jackson, Elisabeth; Gorton, Matthew; White, John
  4. The Governance Grenade: Mass Privatization, State Capacity and Economic Growth in Post-communist Countries By Patrick Hamm; David Stuckler; Lawrence King

  1. By: Pinto, Brian; Ulatov, Sergei
    Abstract: Russia had more-or-less completed the privatization of its manufacturing and natural resource sectors by the end of 1997. And in February 1998, the annual inflation rate at last dipped into the single digits. Privatization should have helped with stronger micro-foundations for growth. The conquest of inflation should have cemented macroeconomic credibility, lowered real interest rates, and spurred investment. Instead, Russia suffered a massivepublic debt-exchange rate-banking crisis just six months later, in August 1998. In showing how this turn of events unfolded, the authors focus on the interaction among Russia's deteriorating fiscal fundamentals, its weak micro-foundations of growth and financial globalization. They argue that the expectation of a large official bailout in the final 10 weeks before the meltdown played an important role, with Russia's external debt increasing by $16 billion or 8 percent of post-crisis gross domestic product during this time. The lessons and insights extracted from the 1998 Russian crisis are of general applicability, oil and geopolitics notwithstanding. These include a discussion of when financial globalization might actually hurt and a cutoff in market access might actually help; circumstances in which an official bailout could backfire; and why financial engineering tends to fail when fiscal solvency problems are present.
    Keywords: Debt Markets,Emerging Markets,Banks&Banking Reform,Access to Finance,Currencies and Exchange Rates
    Date: 2010–05–01
  2. By: Simon Gaechter (University of Nottingham); Benedikt Herrmann (University of Nottingham)
    Abstract: We report evidence from public goods experiments with and without punishment which we conducted in Russia with 566 urban and rural participants of young and mature age cohorts. Russia is interesting for studying voluntary cooperation because of its long history of collectivism, and a huge urban-rural gap. In contrast to previous experiments we find no cooperation-enhancing effect of punishment. An important reason is that there is punishment of contributors in all four subject pools. Thus, punishment can also undermine the scope for self-governance in the sense of high levels of voluntary cooperation that are sustained by sanctioning free riders only.
    Keywords: social norms, free riding, misdirected punishment, experiments
    Date: 2010–04
  3. By: Jackson, Elisabeth; Gorton, Matthew; White, John
    Abstract: Utilising primary survey data, this paper evaluates the relationships between a set of supplier development strategies and performance within the milk industry in Armenia and Ukraine. Improving supplier performance is a critical task for the dairy industry in the Former Soviet Union as, during the 1990s both the quantity and quality of agricultural output deteriorated sharply. Fragmented supply chains led to high transaction costs and, in some cases, market failure. Drawing on the work of Krause et al. (2000) and Doney and Cannon (1997), a theoretical framework is presented that proposes that, either directly or indirectly, supplier assessment strategies, supplier incentives, competitive pressure, direct involvement, and trust between buyers and sellers, lead to improvements in supplier performance. Data from 618 milk producers were analysed by structural equation modelling to test ten research hypotheses. All relationships are significant except those related to supplier assessment. In particular, the results indicate that both trust and competitive pressure have a direct and positive impact on performance improvement. Trust can be fostered by buyers providing feedback and performance data to suppliers. In contrast, direct involvement strategies are negatively related to performance improvement and weaken farmersâ trust. Implications for managers are discussed along with suggestions for further research.
    Keywords: Agribusiness, Agricultural and Food Policy, Farm Management, Food Consumption/Nutrition/Food Safety, Research and Development/Tech Change/Emerging Technologies, Risk and Uncertainty,
    Date: 2009–10
  4. By: Patrick Hamm; David Stuckler; Lawrence King
    Abstract: Why did the transitions from state socialism to capitalism result in improved growth in some countries but significant economic declines in others? Three main arguments have been advanced: (1) the most successful countries rapidly implemented privatization, liberalization, and stabilization policies; (2) failures were unrelated to economic policies but occurred because of a poor institutional environment; and (3) the policies were counterproductive because they damaged the state. We present a state-centered theory which argues that the more radical the privatization program, the worse the subsequent performance. We agree with the second account, that institutions matter, but demonstrate that it was radical privatization itself which was a major determinant of institutional weakness. In addition, our account holds that privatization was in fact a crucial determinant of institutional failure, operating primarily through the creation of a massive shock to state revenues. We perform cross-national regressions for a sample of 30 countries between 1990 and 2000, and find that mass privatization programs negatively impacted economic growth, state capacity and property rights protection. These findings are corroborated with data from a random sample of 4,000 firms from 26 post-communist countries. We show that in countries which implemented sizable mass-privatized programs, privatized firms were substantially less likely to engage in successful industrial restructuring but considerably more likely to engage in barter and have tax arrears than their state owned counterparts.
    Date: 2010

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