The informal economy and the growth of small enterprises in Russia1 |
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Authors: | Byung‐Yeon Kim Youngho Kang |
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Affiliation: | 1. Department of Economics, Seoul National University, Seoul, South Korea. E‐mail: kimby@snu.ac.kr;2. Department of Economics, University of Colorado at Boulder, Boulder CO, USA. E‐mail: youngho.kang@colorado.edu |
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Abstract: | This article uses Russian regional data to estimate the determinants of the informal economy and to examine the relationship between the informal economy and the growth of legally registered small private enterprises during the transition period. After obtaining an estimate of the size of the informal economy in each Russian region from 1992 to 1999, an analysis is performed to find whether reform progress and institutional qualities account for the informal economy. An evaluation of the links between the informal economy and the growth of small enterprises within Russia is then carried out. The findings suggest that Russia's informal economy resulted from a delay in reform and low qualities of institutions. It was found that the growth of small enterprises is positively affected by the informal economy. These results imply that the informal economy helped entrepreneurial activities to grow in the face of government failure, but these informal activities tend to become official over time. |
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Keywords: | Informal economy Russia small enterprises O17 O47 P31 P37 |
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