Defence Industry Transformation in Russia: Evidence from a Longitudinal Survey

The article is devoted to the new phenomena in the market transformation of the Russian defence-industrial complex. Based on the data generated by the repeated survey of the CEOs (general directors) of defence enterprises in 1995‐99, it examines economic performance of enterprises, their conflicts with the government and efforts at internal restructuring brought about by reductions of Russia's defence spending, mass privatisation and opening up of the domestic market. We found that despite the dramatic reduction in defence orders, inconsistent government policies and extremely unfavourable macroeconomic environment, the Russian defence industry has made significant progress in its adjustment to the market. Even before the devaluation of the ruble in the autumn of 1998 economic performance of defence enterprises had been gradually improving; it entered a virtual boom since then. Contrary to widely held views, the painful experience of the 1990s has not made the top managers of the defence industry more hostile to reforms: at the end of the decade they were generally more supportive of the market than in 1995.     

Privatisation of the Russian Defence Industry: Ownership and Control Issues

This article analyses the outcome of privatisation in the Russian defence industry in the second part of the 1990s. It is based on the results of the longitudinal survey of defence enterprises conducted over the period 1995‐99 in the main defence production regions of Russia: Moscow, St Petersburg, Central European region, Western Siberia, Volga region, the Urals and the Far East. Using the survey data, we investigate the distribution of ownership in defence enterprises and examine the non-linear relationship between ownership and control inside these enterprises. We also test the hypothesis of the growing criminal influence in defence enterprises and outline a possible future scenario for privatisation in the defence industry.     

The Role of Foreign Direct Investment in the Privatisation and Restructuring of the Czech Motor Industry

Foreign direct investment (FDI) has been considered one of the crucial factors of a successful economic transformation in Central and Eastern Europe. This article investigates the role of FDI in the privatisation and restructuring of the Czech motor industry in the 1990s. In particular, it examines how governmental policies towards FDI affected FDI inflows, the immediate effects of FDI at the enterprise level, and the contested nature of this change. Advantages of foreign ownership for Czech enterprises, such as access to investment capital, access to sale and distribution networks of parent companies and technology transfer are discussed, as well as examples of failures of FDI to result in a successful enterprise restructuring. The information presented is based upon in-depth interviews with top managers of twenty component suppliers, governmental officials and vehicle makers in the Czech Republic as well as on the secondary data.     

论我国劳动关系契约化中的正式约束与非正式约束

由于我国社会习俗、文化、价值观等非正式约束与正式约束的不匹配,导致《劳动合同法》的实施效果不尽如人意,这些非正式约束的限制主要表现在:关系经济降低了正式劳动合约的作用;集体主义制约了正式契约关系的拓展;等级制不利于建立平等的劳动契约关系;人治不利于劳动契约按法律的手段有效实施。正式制度只有在与非正式制度相容的情况下才能发挥作用,我国劳动关系契约化中正式约束与非正式约束不相适应会带来一些问题,主要表现在:它将影响我国社会从身份到契约的进程;影响我国《劳动合同法》的实施及其效果;它使劳动合同的作用难以发挥。     

Initial endowments and economic reform in 27 post-socialist countries

This study explores how initial endowments at the start of transition have shaped reform outcomes and reform trajectories in 27 former communist countries in Europe and Central Asia. Countries of the former Russian Empire that had a large resources sector at the start of transition underperformed other countries in terms of the speed and the depth of economic reforms. The effect is particularly strong for privatization, enterprise restructuring and competition policy. Within country, Ottoman or Russian provinces that had a large natural resources sector in 1989 have a lower share of entrepreneurs and of small and medium sized enterprises today and also experience endemic corruption. Our results indicate that the propensity, or ability, of special interest groups to capture the reform process that would erode their rents were facilitated by the quality of institutions whose foundations go back centuries; and that the effects on the local economy are real.     

Township and Village Enterprises,Openness and Regional Economic Growth in China

The authors argue that under the current political and economic conditions the restructuring of Russian enterprises on a mass scale is impossible, because the aims and methods of the restructuring programme often get in the way of the interests of different groups who in fact prosper on the inefficiency of private enterprise. These groups pay lip service to the restructuring process but do everything possible to slow down and block the process when their interests are threatened. The only group which is truly interested in restructuring of an enterprise is the middle managers. However, they are the least influential and least organised to affect enterprise restructuring. The article also addresses the legislation and especially the new law on bankruptcy, which potentially could speed up the restructuring process to a considerable extent. However, owing to the activities of some of the interest groups analysed, the law is failing to achieve its original aim. The occasional success stories have a very limited impact on Russian industries and in fact confirm the argument.     

Confidence in formal institutions and reliance on informal institutions in Bosnia and Herzegovina

This article uses survey data to investigate the relationship between citizens’ confidence in formal institutions and reliance on informal institutions in Bosnia and Herzegovina (BiH). We find an endogenous substituting relationship and that the different institutional structures currently existing in the two entities in BiH are significantly linked to respondents’ confidence in formal and reliance on informal institutions. In addition, perceptions of higher indirect costs of institutions and a lack of their improvement are associated with a lower confidence in formal and a greater reliance on informal institutions; the minority ethnic groups in each region are less confident in formal and rely more on informal institutions compared to the majority group; and more reliance on informal institutions is found amongst males and respondents from urban areas.     

Enterprise restructuring and adjustment in the transition to market economy: lessons from the experience of Central and Eastern Europe

Some aspects of the process of enterprise restructuring and adjustment in the Central and Eastern European countries are analysed on the basis of evideance from recent empirical research on microeconomic performance in these transition economies. The paper outlines a stylized picture of some types of enterprise behaviour which occur in this period and highlights a number of issues related to the process of enterprise restructuring and adjustment such as the problem of micro budget constraints, the motivation for enterprise restructuring, the issues of corporate governance. Some of the current impediments to enterprise restructuring as well as some of the determinants of enterprise performance in the transition periód are also featured in the paper.     

Engines of Growth in China: The Limits of Informal Institutions

Abstract:

Since the 1978 reforms, China has experienced rapid economic and social development. GDP growth has been in the double digits on average yearly, creating the fastest sustained economic growth recorded by a major economy in history. Not only did this transform the economy and society at large, China reached important milestones in terms of reducing poverty and creating prosperity in a short period of time. This article uses the conceptual framework of new institutional economics to examine China’s economic growth and how growth has been achieved largely by ‘informal institutions’ that are grounded in culture, customs, and private interactions that emerge spontaneously. The trajectory by which these informal institutions left their imprint on China’s complex economic landscape and how they can constrain future economic growth are also of central importance. After examining decentralization and risk management practices, property rights, and the legal system, we emphasize the importance of creating formal institutions necessary for long-term growth, most importantly innovation. Preliminary evidence shows total factor productivity is tapering off which may reflect the constraints of China’s institutional environment. This ought to be reversed if China is to enjoy long-term sustained growth.     

Amending budget bills in the Russian State Duma

Abstract

Do budget bills change during review in the Russian State Duma? If so, by how much and why? Portrayals of the contemporary Federal Assembly as a ‘rubber stamp’ parliament would suggest that budget initiatives undergo no amendment during the formal period of legislative review. There is, however, evidence of bill change. The article’s primary goal is to present this surprising evidence, focusing on changes to spending figures in the 2002–2016 budget bills. The article also discusses why such changes are made, assessing hypotheses concerning legislator influence, technical updating and intra-executive conflict.     

Engendering Economic Policy in Africa

ABSTRACT

Despite Africa's relatively commendable growth performance since 2000, growth has not been accompanied by structural transformations. First, there has been little diversification from agriculture into industry, particularly manufacturing. Second, the poverty headcount and inequality remain high in many countries, even as African countries continue to rank lowest on the United Nations Development Programme's Gender Inequality Index. This contribution goes beyond the individualistic approach of supply-side policies and unveils deeper mechanisms that need to be tackled for the two transformations (diversification and inequality reduction) to occur. It demonstrates that gender inequality relies on unwritten but dominant social norms, hence, informal institutions. The removal of formal legislation that constrains women's agency, the enactment of formal laws, and the implementation of economic policies designed specifically to create incentives for behavior change are recommended.     

Information, Informal Finance, and SME Financing

Informal finance exists extensively and has been playing an important role in small- and medium-sized enterprise (SME) financing in developing economies. This paper tries to rationalize the extensiveness of informal finance. SME financing suffers more serious information asymmetry to the extent that most SMEs are more opaque and can only provide less collateral. Informal lenders have an advantage over formal financial institutions in collecting “soft information” about SME borrowers. This paper establishes a model including formal and informal lenders and high- and low-risk borrowers with or without sufficient collateral and shows that the credit market in which informal finance is eliminated will allocate funds in some inefficient way, and the efficiency of allocating credit funds can be improved once informal finance is allowed to coexist with formal finance. Translated from Economic Research Journal, 2005, 7 (in Chinese)     

Tax evasion in transition: Outcome of an institutional clash? Testing Feige's conjecture in Albania

A field survey of households was conducted in Tirana, Albania in 2000. A response rate of 89.3% yielded 1.340 valid questionnaires, allowing me to test Feige's (In: Nelson, J.M., Tilley, C., Walker, L. (Eds.), Transforming Post-communist Political Economics. National Academy Press, Washington, DC, p. 21) conjecture that more tax evasion will be observed, when formal and informal institutions clash. Respondents’ attitudes towards formal and informal institutions were obtained by applying factor analysis to their responses to a series of attitudinal questions. The theoretical importance of the interaction between formal and informal institutions in determining tax evasion finds empirical support in the data.     

Explaining informal payments for health services in Central and Eastern Europe: an institutional asymmetry perspective

The aim of this paper is to propose and evaluate a new institutional theory explanation for patients making informal payments for health services in Central and Eastern Europe. This views informal payments by patients to healthcare professionals as arising when formal institutional failures lead to an asymmetry between the laws and regulations of formal institutions and the unwritten rules of informal institutions. Reporting a 2013 Eurobarometer survey of the prevalence of informal payments by patients in Central and Eastern European countries, a strong association is revealed between the level of asymmetry between the formal and informal institutions, and the propensity to make informal payments. The association between informal payments and various formal institutional imperfections is then explored to evaluate which structural conditions might reduce this institutional asymmetry, and thus the propensity to make informal payments. The paper concludes by exploring the implications for tackling such informal practices.     

Restructuring of the Hungarian Electricity Industry

Restructuring the monopolistic, state-owned, obsolete and polluting utility industries of post-socialist economies poses a challenge for the utility deregulation wave travelling around the world. Utility restructuring in the Central and Eastern Europe (CEE) region is unique from several perspectives, including the domination of foreign capital vs. national resources as the only feasible vehicle for a drastic change in the industry and the ambitious goals of harmonisation with the EU liberalisation schedule to accelerate accession. It is also widely expected that deregulation will help bring down world-record high energy intensities in these economies. Hungary has been the pioneer among economies in transition in unbundling, deregulating and privatising the utility industries and taking the first steps towards EU-conforming market liberalisation within less than half a decade. The first stages of privatisation and restructuring have been declared a success story in the Western media. However, what is a success story from a foreign perspective may be seen differently from other viewpoints. The article describes the process of utility restructuring in Hungary and examines its impact from the economic, environmental and policy perspectives. The article also compares the pioneer Hungarian deregulation with other CEE countries' restructuring of their energy sectors. However, the lessons to be learned from the Hungarian electricity industry restructuring are not only vital for other economies in transition but are often universally applicable.     

Use of borrowed start-up capital and micro enterprises in Mexico: existence of liquidity constraints

Using the National Survey of Micro enterprises (ENAMIN, Encuesta Nacional de Micronegocios) data I test for the presence of liquidity constraints for obtaining start-up capital in Mexico’s credit markets (formal and informal). I use the bivariate probit model with partial observability to recognize two important decisions in the credit allocation process: first, whether an owner of a micro enterprise wants to apply start-up loan and, second, whether financial institutions decide to provide or not to provide the loan. Finally, I compare the results from this model to those of a simple probit model that looks at whether a micro enterprise owner gets funding or not (i.e. the probit model implicitly assumes that no liquidity constraints exist). The findings of this study show that there is substantial heterogeneity in the socioeconomic background of borrowers, as well as in the sources for start-up capital employed by micro enterprises in Mexico. Moreover, there is clear evidence of liquidity constraints in the market for start-up capital that could hinder the creation and growth of small enterprises. Applying the findings of the study, policy makers could fundamentally increase the effectiveness in establishing an economic environment that fosters growth.

Hardened Budgets and Enterprise Restructuring: Theory and an Application to Romania

We identify the presence of soft budgets and analyze their impact on enterprise restructuring in Romania over the initial transition period. A simple analytical framework is developed to show that hardened budget constraints foster rationalization of costs but not new investment. The latter requires availability of external financing. The model emphasizes the importance of the credibility of hardened budgets and the empirical findings are consistent with its predictions. Using a sample of over 4000 Romanian enterprises from 1992 to 1995, we show that hardened budget constraints induce labor shedding. However, there is no evidence of new investments. J. Comp. Econ., December 2001, 29(4), pp. 749–763. University of Sienna, Central European University, and CEPR; and World Bank and CEPR. © 2001 Elsevier ScienceJournal of Economic Literature Classification Numbers: G32, G34.     

A review of bank performance during transition in central Europe

This study, based on panel data from 189 industrial enterprises in 1992‐96, shows that privatisation 'on average' produces little improvement in performance of Russian enterprises. However, disaggregating the process, we reveal that methods of privatisation do influence performance but the impact is not always positive. The state seems to be a passive shareholder. At the same time, our results suggest that majority state ownership is preferable to a state minority stockholding, possibly because the absence of a monitoring shareholder in the latter case does not permit managers to achieve their own objectives at the expense of other shareholders.     

Resilience and Dynamism of Embedded Financial Transactions in Cameroon

Following the recent financial crisis, institutional economists have issued a “call” for institutionalist research on alternative financial systems. While suggestions have been forthcoming, (for example, in Volume 48, Issue 4 of the Journal of Economic Issues), most have centered on national-level innovations in advanced capitalist countries, prompting further calls for “community” and individual level anti-capitalist financial relations. With this article, we respond to such calls. We show how networks of finance in Cameroon bridge the formal/informal dualisms in lending/savings activities. We demonstrate that any debates about whether to formalize informal financial institutions or leave them alone weaken in Cameroon because, through networks, people access both formal and informal financial institutions for different purposes and at various stages in the life of these institutions. This dynamism explains why, in spite of the growth of money markets in Cameroon, informal financial institutions have not disappeared, nor declined. In fact, they have expanded, contrary to predictions in existing new institutional economics research. While informal institutions have evolved, they have not necessarily become formal banks, microfinance, or stock markets. Rather, the informal financial institutions have adopted and adapted in terms of both lending and saving practices in a country where growing formal financialization has become the norm. Our findings challenge neoclassical and new institutional economics theories about money, credit, and the actors in the money market.     

China’s rural institutions and governance since the beginning of the rural reform

ABSTRACT

This paper looks at how China governs its vast rural territories. The structure of rural governance relies not only on the extent and form of the state’s authority, but also on the principal–agent relationship between the state and local stakeholders, as well as the role of the informal institutional arrangements that serve as the foundation for rural governance. China’s 40 years of reform and opening have led to the transformation of rural China into urban and rural China. The rules and order of informal institutions have evolved and changed significantly, and the cost-benefit structure of formal state governance has been amended. The appropriate rural governance system for village transformation improves the performance of the country’s direct governance and the entrustment–agent system for village governance. Further, the rural governance system balances formal and informal institutions to achieve an effective institutional arrangement.