Transformational Decline and Preconditions of Growth in Russia

Maxim Bouev, Matveenko Vladimir () and Ekaterina Vostroknutova
Authors registered in the RePEc Author Service: Владимир Матвеенко

EERC Working Paper Series from EERC Research Network, Russia and CIS

Abstract: The authors analyze the characteristics of recession, linking it with changes in economic agents' behavior after liberalization. They attach special importance to labor shifts between the "old" and the "new" sectors. Inter-sectoral shifts in Russia have been slowed down due to the practice of labor hoarding in the old sector. To explain these phenomena in the Russian economy the authors construct an equilibrium model of labor markets which assumes the existence of collectivist labor relations in the old sector. The results of their study show that both stronger personnel monitoring in enterprises with state and mixed ownership and the abolition of collectivist labor relations would have the effect of increasing labor productivity, reducing the gap between officially registered employment and actually used labor in the old sector, and leveling wage rates in the old and the new sectors. These measures might create the necessary preconditions for an upturn in the economy and long-term growth. The authors also consider a dynamic model which sees the shadow sector as concealed activities of firms working in the formal economy. Computer simulation of the model produced varying qualitative results depending on the selected parameters. The authors find that a reduction in the tax rate is crucial for increasing the official output.

Keywords: dynamics; transformational decline; shadow economy; sectoral shift of labor; wages differential (search for similar items in EconPapers)
JEL-codes: E23 E24 J23 O17 P27 (search for similar items in EconPapers)
Pages: 54 pages
Date: 1998-07-10
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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