/pdf/foreign-direct-investment-during-transition-determinants-and-2pbaoggwju.pdf

Foreign direct investment during transition. Determinants and patterns in Central and Eastern Europe and the former Soviet Union

In this Paper we study, both theoretically and empirically, the relationship between barter and the indebtedness of Russian firms We build a model in which a firm uses barter to protect its working capital against outside creditors even when barter involves high transaction costs The main innovation of our work is to allow renegotiation between the firm and its creditors If the creditors are rational, they often agree to postpone debt payments in order to avoid destroying the firm's working capital It turns out, however, that even if the firm cannot ensure it will not divert cash ex post, the outcome of renegotiation still provides ex ante incentives to use barter We show that the greater the debt overhang, the more likely the use of barter, and although the possibility of debt restructuring reduces barter, it does not eliminate it altogether We also discuss the role of the government bond market and weak bankruptcy legislation The firm-level evidence from two independent surveys is consistent with the model's predictions

Debt Overhang and Barter in Russia

A general consensus in the transition economies literature links the existence of enterprise restructuring with the pace of the transition process and the potential for economic growth. The existing literature is less clear, however, about whether the lack of economic growth is caused by the lack of enterprise restructuring. Complicating the debate in Russia is the confusion regarding the role of barter transactions in enterprise restructuring. Much of the confusion is generated by proponents of a ?virtual economy? interpretation of how the Russian economy and Russian enterprise managers operate. This paper dispels much of the confusion about the existence of enterprise restructuring and the corresponding role of barter by demonstrating why the virtual economy model fails to accurately depict economic actions or outcomes in Russia. We develop the argument that barter is closely related to an absence of liquidity in the Russian economy, using both macro-level and micro-level data to document the consequences of ?structural illiquidity.? Our results are unambiguous: both the incidence and volume of barter transactions are inversely related to liquidity. We conclude that analyses using barter transactions as evidence of the lack of enterprise restructuring in Russia stem from: (1) the lack of clear consensus about what constitutes enterprise restructuring in transition economies and how it varies with the stage of the transition process; (2) errant assumptions about managers? objective functions; (3) the relative mix of formal and informal restructuring mechanisms; (4) the lack of attention to industry variation and, within industry, to managerial characteristics; and (5) the Texan complex (if it ain?t big, it ain?t ...) which causes analysts to ignore changes in enterprise operations unless they occur on a grandiose scale.

/pdf/virtual-reality-barter-and-restructuring-in-russian-industry-1cnv1g3bkp.pdf

Virtual Reality: Barter and Restructuring in Russian Industry

https://deepblue.lib.umich.edu/bitstream/handle/2027.42/39723/wp339.pdf;sequence=3

What impact did privatization have on employment in Russian industry? Utilizes data collected from a panel of 6,205 civilian manufacturing firms in the Central, Volga, North Caucasus, Northern and Western Siberian regions of Russia to explore in more detail the relationship between changes in ownership and employment in Russian industry between 1992 and 1995. In particular investigates whether change in ownership structure is relatively more important than industry, region, or the competitive position of the firm in explaining variation in the employment response to changing output conditions during the initial stage of Russia’s transition from plan to market.

/pdf/ownership-and-employment-in-russian-industry-1992-1995-2dmzgpi2ub.pdf

Ownership and employment in Russian industry: 1992‐1995

The phenomenon of barter as the principal form for making domestic transactions in industry sharply distinguishes Russia from other countries with transitional economies. In recent years, barter in our economy has clearly demonstrated its stability, viability, and scope. There are a significant number of publications by both domestic and foreign authors that are devoted to the theoretical interpretation of this phenomenon, its origins and consequences, and methods of overcoming it.1 Approaches to the explanation of barter are influenced by virtually all the principal areas of contemporary economic theory—neoclassical macroeconomics, which relegates the main role in the appearance of barter to the factors of inflation, monetization, and interest rate levels; neoclassical microeconomics, which considers the quantitative aspects of barter exchange from the standpoint of the principles of maximizing profits through the selection of the price and volume-product mix policies of enterprises in the barter and mon...

V. Makarov

Papers

Barter in Russia: An Institutional Stage