Disorganization and financial collapse |
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Authors: | Dalia Marin Monika Schnitzer |
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Institution: | a University of Munich, Munich, Germany b Center for Economic Policy Research, London, UK c CES-ifo, Munich, Germany |
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Abstract: | Since the fall of communism, the former Soviet Union experienced a strong output decline and a dramatic increase in arrears and barter. We develop a model which explains how these three phenomena are connected. We introduce liquidity and credit constraints into a model of disorganization and show how these problems can alleviate the hold-up problem. We argue further that barter creates a hostage that allows to deal with disorganization when credit enforcement becomes prohibitively costly. Based on a firm survey in Ukraine in 1997, we test how input shortages, financial shortages and barter affect output growth of firms. |
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Keywords: | G3 P3 D2 O1 |
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