Michael Alexeev

The influence of black markets on a queue-rationed centrally planned economy

Abstract In centrally planned economies in which prices are fixed, and the rationing mechanism is waiting line queues, we show that an equilibrium of waiting times exists. We then introduce a “black market” in which individuals can trade commodities that they have acquired through the official economy. An equilibrium of black market prices and waiting times is shown to exist; further, the economy with a black market is “queue-efficient.”. However, the introduction of black markets is not necessarily a Pareto improvement over an economy without black markets (even when we allow winners to compensate losers).

A Note on Measuring the Unofficial Economy in the Former Soviet Republics

This note argues that the most commonly used estimates of the size of the unofficial economies in the former Soviet republics are flawed. Most important, they are based on calculations that disregard the variation in unofficial economic activity across space in the pre-transition Soviet Union. In addition, these estimates appear to understate the size of the unofficial economies in these countries. We propose alternative estimates and find that they are more strongly related to the institutional factors commonly used to explain the size of the unofficial sector. Our estimates also show that the size of a countrys pre-transition unofficial economy is an important predictor of its size during the transition. This suggests that the size of the unofficial economy is to a large extent a historical phenomenon only partly determined by contemporary institutional factors.

The Effect of Privatization on Wealth Distribution in Russia

The paper considers the Russian privatization process and examines how its deviation from the competitive sale standard was likely to affect wealth inequality. (Privatization here is defined narrowly as the transfer of existing assets from government ownership to private hands.) While empirical evaluation is all but impossible due to the dearth of reliable data, it is feasible to analyze the institutional features of Russian privatization in terms of their effect on redistribution of wealth. The paper argues that the most relevant and interesting issue is to evaluate privatizations distributional consequences relative to the informal pre-reform property rights. In light of this, privatization is modelled as a rent-seeking contest with incumbency advantage of enterprise managers who initially held the greatest informal rights over assets. The rent-seeking contest is shown to strongly magnify this pre-reform wealth inequality reflected in the incumbency advantage. In addition, the paper analyzes the distributional consequences for various wealth groups of the differences in the composition of their pre-reform informal wealth, most importantly a relatively large share of housing assets in the wealth of the poor. The effect of wealth redistribution on economic growth in Russia is also discussed.

Fiscal federalism and incentives in a Russian region

Transfers from a higher-level government budget may affect the incentives of lower-level governments to foster their tax base. If transfers offset completely changes in own budgetary revenues, fiscal incentives are destroyed. Using the data from a Russian region, we cannot reject the hypothesis that transfers offset completely changes in municipal revenues, although the transfers are adjusted with a lag. The estimates suggest that this transfers policy is due in part to short time horizons for regional governments and commitment problems. Budgetary constraints of Russias regions could have also played a role. Such initial conditions distinguish Russia from Poland and China.

The Natural Resource Curse and Economic Transition

Using cross-country regressions, we examine the relationship between “point-source” resource abundance and economic growth, quality of institutions, investment in human and physical capital, and social welfare (life expectancy and infant mortality) for all countries and for the economies in transition. Contrary to most literature, we find little evidence of a natural resource curse for all countries. Only the “voice and accountability” measure of institutional quality is negatively and significantly affected by oil wealth. In the economies in transition, there is some evidence that natural resource wealth is associated with lower primary school enrollment and life expectancy and higher infant mortality compared to other resource rich countries. Compared to other economies in transition, however, natural resource abundant transitional economies are not significantly worse off with respect to our indicators.

Market vs. Rationing: The Case of Soviet Housing

Economists devote considerable effort to the analysis of various forms of nonprice rationing. These analyses generally disregard forces that act to foil rationing schemes. Even with a commodity that seems to be easy to control, however, in a system with extensive rationing experience, nonprice rationing schemes can be circumvented. This thesis is examined for the case of housing distribution in the U.S.S.R. utilizing the data from a survey of recent Soviet emigres. It is shown that administrative rationing of Soviet urban housing is partially replaced by market forces acting usually through the second economy. Copyright 1988 by MIT Press.

If market clearing prices are so good then why doesn't (almost) anybody want them?

Abstract Welfare consequences of retail price reform in a Soviet-type economy are investigated using a queue-rationing model. It is shown that to make every consumer better off market clearing pricing may have to be accompanied by a differential monetary compensation. Such Pareto-improving compensation schemes are virtually impossible to implement given the effects of illegal rents generated by the existing price system and the lack of correlation between these rents and legal incomes. In addition, some other problems with market price reform in a Soviet-type economy are pointed out.

The Russian Oil Tax Regime: A Comparative Perspective

Two American economists specializing in tax policy and the economy of Russia examine fiscal policies and instruments utilized by the Russian government to derive revenues from the countrys oil production and exports, and compare these policies with relevant measures in Australia, Canada, Norway, the UK, and United States. The authors proceed to analyze the net present value shares resulting from the development of an oil deposit that accrue to the government and to investors in Russia prior to 2007 and in 2008-January 2009 after adoption of changes in the fiscal regime. The analysis covers a variety of scenarios, including zero inflation and debt, positive inflation and debt levels, as well as price volatility. It yields, inter alia, a basic finding to the effect that the share of a projects net present value accruing to Russias government is high in comparison with that in the other oil-producing countries discussed in the paper. Moreover, relative to its mean return, the Russian government bears significantly less risk than the investor. Journal of Economic Literature, Classification Numbers: C150, E620, H250, L710, Q400. 1 figure, 10 tables, 44 references, appendix.

Income Distribution and Price Controls: Targeting a Social Safety Net During Economic Transition

During the ongoing post-communist economic transitions, the relative well-being of many people is changing rapidly, and governments are not well positioned to accurately measure individual living standards. Under such circumstances, continued price controls over basic consumer goods within the state sector, and the associated queuing, can form a serviceable device for targeting poor people for subsidies. With a fixed-price state sector and free-price parallel markets, rich people might choose to avoid queues and shop in the free markets, while poor people would prefer to pay low nominal prices and queue in the state sector. The targeting of subsidies through queues, therefore, can be accomplished even if the government has no information on individual income or living standards. When the alternative to price controls is a poorly targeted explicit social safety net, the resource cost of queues might be more than compensated for by an improvement in the targeting of subsidies.

Microeconomic modeling of parallel markets: The case of agricultural goods in the USSR

Abstract In a centrally planned economy, non-market-clearing prices fixed by the state cannot be used directly to estimate consumer behavior models. This paper represents an attempt to overcome this problem by utilizing prices in a parallel “free” market. An equilibrium model incorporating parallel markets is discussed and a demand curve arising from this model is estimated using data for the markets for meat and milk in the USSR. the price and income elasticities of demand for these goods are found to be significantly higher than those estimated for the United States.