Rackets, Regulation and the Rule of Law

Ekaterina Zhuravskaya and Timothy Frye

No 2716, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Governments that levy predatory regulation and provide few weak legal institutions draw businesses into the unofficial economy and compel them to hire private protection organizations. Based on a survey of shopkeepers in three cities in Russia, we find that retail shops face very high levels of predatory regulation and have frequent contacts with private protection rackets. In addition, we show that higher levels of regulation are associated with weaker legal institutions and a higher probability of contact with a private protection organization. We also find that shopkeepers view private protection organizations primarily as a substitute for state-provided police protection and state-provided courts. These results emphasize the importance of public sector reform as a component of economic transition.

Keywords: Regulation; Transition; Government; racket (search for similar items in EconPapers)
JEL-codes: H39 K20 K42 (search for similar items in EconPapers)
Date: 2001-03
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Citations: View citations in EconPapers (5)

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Journal Article: Rackets, Regulation, and the Rule of Law (2000)
Working Paper: Rackets, Regulation and the Rule of Law (2000)
Working Paper: Rackets, Regulation and the Rule of Law (2000)
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