POLITICS AND PROPERTY RIGHTS :EVIDENCE FROM RUSSIA 'S REGIONS

Timothy FryeOhio State University

The National Council for Eurasian and East European Researc h910 17 th Street, N .W .

Suite 300Washington, D .C. 20006

TITLE VIII PROGRAM

Project Information*

Principal Investigator :

Timothy Frye

Council Contract Number:

814-26f

Date :

March 18, 2001

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' The work leading to this report was supported in part by contract or grant funds provided by the National Council fo rEurasian and East European Research, funds which were made available by the U .S . Department of State under TitleVIII (The Soviet-East European Research and Training Act of 1983, as amended) . The analysis and interpretationscontained herein are those of the author.

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Executive summary

Many have identified the legal environment as a critical obstacle to the development of a mor e

democratic government and a more vibrant economy in Russia . Shady businessmen, corrupt politicians,

and a failed legal system have become the main culprits in stories of a Russian transition to a market

economy and democracy gone awry . This view has influenced everyone from western politicians to

Hollywood screen-writers . The lawlessness of post-communist Russia has become an item o f

international conventional wisdom .

Is the conventional wisdom still valid? Is a more nuanced view of the legal environment in

Russia more appropriate? How strong is the demand for legal stability in Russia? What factors driv e

secure property rights? Does the legal environment vary across regions in Russia? This paper seeks t o

provide preliminary answers to these questions by analyzing the results of a survey of 495 firms in eight

cities in Russia conducted in October/November 2000 .

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Introductio n

Many have identified the legal environment as a critical obstacle to the development of a mor e

democratic government and a more vibrant economy in Russia . Shady businessmen, corrupt politicians ,

and a failed legal system have become the main culprits in stories of a Russian transition to a market

economy and democracy gone awry . This view has influenced international financial organizations tha t

have responded by pouring millions of dollars into legal reform . It has also influenced western politician s

who are concerned about the security implications of Russian crime, and script writers seeking an exoti c

and unstable country to provoke an international crisis in their films. Indeed, the extent of corruption and

lawlessness in Russia has become deeply accepted as a conventional wisdom in Moscow, Washington ,

and even Hollywood .

Is the conventional wisdom still valid? Is a more nuanced view of the legal environment in

Russia more appropriate? How strong is the demand for legal stability in Russia? What factors driv e

secure property rights? Does the legal environment vary across regions in Russia?

Revisiting these questions is important for several reasons . First, the legal environment in Russi a

is hardly a constant . Thus, frequent assessments of progress are needed . Second, the conventional

wisdom often lags behind changes on the ground. It is often the case that "wisdoms" becom e

conventional among the broader public only as their basis in reality subsides . Third, analyzing the legal

environment in October-November 2000 can provide a baseline that can be used to measure the succes s

or failure of structural reforms recommended by the Putin administration .

Overview of findings

To provide preliminary answers to these questions, the author commissioned a survey of 49 5

firms in 8 cities in Russia in October/November 2000 that produced the following results :

1) There is considerable demand for legal stability and relatively high ratings for the performance of state

arbitration courts, but little confidence that these courts can protect business against the state .

2) Significant differences in the legal environment exist across cities, but Moscow performs no better o r

worse than other cities .

3) Businesses favor relying on the federal government rather than local or regional governments to reduc e

corruption and crime. They also prefer that governors be elected by popular vote rather than appointed b y

the President .

4) Membership in business organizations and satisfaction with the arbitration courts are associated with

higher levels of planned investment, even when controlling for the size, type, profitability, and city i n

which the firm is located .

Brief description of the surve y

Between October 10, and November 15, 2000, the All-Russian Center for the Study of Publi c

Opinion (VTsIOM), conducted a survey of 495 firms in 8 cities in Russia . The cities included Moscow ,

Nizhnii Novgorod, Novgorod, Smolensk, Tula, Voronezh, Ufa, and Ekaterinburg . The survey included a

mix of fairly rich and fairly poor cities and a mix of communist-led and noncommunist-led city an d

regional governments. Firms were chosen using a stratified random sampling technique .

After obtaining data on the number of employees and the types of fi rms in each region from th e

state statistical agency (GOSKOMSTAT), we stratified the firms by size and type . We then chose firms

at random from within these two strata using regional business directories and GOSKOMSTAT lists o f

firms. We only included firms located in the capital city in each region because these cities typicall y

contain the lion's share of economic activity in the region . In each city we conducted at least 6 0

interviews . Although the number of firms chosen in each region is small, we took pains to ensure that the

sample mirrors the larger population of firms in the region .

We interviewed the manager, the chief executive officer, or the chief financial officer in each o f

these firms. We believed that these individuals had the authority to speak confidently on behalf of the

firm and the knowledge to speak on a broad range of issues . The response rate was 56%. The averag e

interview lasted just under an hour and was conducted face-to-face in Russian .

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Eighty percent of the firms were in industry and 20% in retail trade . The firms ranged fro m

heavy industry giants in the energy and machine-tool building sectors, to light industry firms tha t

produced textiles and food, to retail trading firms and banks . The average firm in our sample employed

840 workers. The smallest firm had four workers and the largest had over 53,000 . Half of the firms had

more than 150 employees . More than 60% of the firms owned the building in which their firm operated

and the rest did not. We found that 65% of the firms in our sample had undergone privatization, 27%

were created solely as private firms, and 10% were state-owned .

Firm managers were primarily male (74%) . Most had a college-level education and had worked

as a director in the firm for 6 to 10 years . The average age was 46 . The oldest manager was 84 and th e

youngest was 23 . Just under a third of firms were members of business organizations .

Table 1 . Descriptive Statistics of Firms in the Sampl e

Firm Characteristic ResponsesAverage number ofemployees

840

Industrial Firms 80%Retail Trading Firms 20%Owned their Building 61%Members of Busines sOrganizations

31%

Property Type:Privatized firmState-owned firmDe novo private firm

65%10%27%

Average Age of the Manage r(yrs)

46

Average years as director ofthe firm

6-10

Male/Female 74%/26%

Demand for a stable legal environmen t

An important debate in studies of the post-communist legal environment concerns the intensity of

demand for legal stability . Early in the transformation many businesses seemed to prefer a very

disorganized legal environment that allowed them to avoid taxes and use legal loopholes to thei r

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advantage . Katharina Pistor (1996) attributed the reluctance of Russian businesses to use state courts to

the low level of demand for legality rather than to the poor performance of Russian courts . She argued

that Russian courts did not perform noticeably worse than in many other countries, but that Russia n

businesses avoided the courts in part to avoid taxes . Similarly, Cheryl Gray and Kathryn Hendley argue d

that demand for legal reform in Russia was far lower in Russia than in Hungary . In their view, this lack

of demand for legal reform helped explain why little progress was made on the issue in Russia . Timothy

Frye (2000a) found that Russian equities and currency brokers expressed little demand for stat e

enforcement of contracts and were far more likely to use their professional organization and informa l

measures to resolve disputes . As these studies were conducted several years ago, it is useful to revisit the

question. How strong is the demand for legal stability in Russia ?

In the survey, we asked firm managers to rate the following problems as an obstacle to thei r

business on a scale of 1-5, with 1 being a small problem and 5 being a big problem . The list includes a

range of problems commonly cited by Russian businesses and analysts as obstacles to economi c

development .

Table 2. Ratings of Significant Problem s

Problem 1-Small Problem,5-Big Problem

High taxes 4 . 3(1 .2 )

Frequent changes in laws 3 . 5(1 .5 )

Strong competition 2 . 9(1 .4 )

Difficulty finding credit 2 . 7(1 .6 )

Lack of qualified managers 2 . 6(1 .3 )

Lack of support from local 2 . 5government (1 .5 )Corruption of government 2 . 4officials (1 .5)

4

Lack of public infrastructure 2 . 2(1 .2 )

Interference in business by 1 . 9government (1 .3 )The racket 1 . 4

(1,0)Means reported with standard errors in parenthese s

On a scale of 1-5, business managers rated frequent changes in laws and other normative acts a s

3 .5 . Thus, in their view the lack of legal stability is a substantial problem . Only high taxes – perennially

cited as the biggest problem for business in Russia – are seen as a bigger problem than a lack of lega l

stability . This result is somewhat surprising . In comparison to previous surveys, the intensity of concern

about the legal environment as a problem for businesses in Russia seems fairly high .

Two interpretations merit examination . The legal environment may have deteriorated in recen t

years and thereby spurred demand for legal stability . Alternatively, as other problems have receded ,

businesses may have begun to focus on the legal environment as a significant problem . The latter view

seems to hold more weight for two reasons . As we will see below, Russian firms give the state arbitration

courts fairly high marks . Second, in past surveys, legal stability was often seen to be a rathe r

insubstantial problem in comparison to finding credit, strong competition, and personnel issues (Frye an d

Zhuravskaya 2000 ; Hendley, Murrell, and Ryterman 2000) . Thus, relative to other issues, the intensity o f

demand for legal reforms seems to be somewhat higher today than in the past .

Views of state arbitration courts

The conventional wisdom holds that Russian businesses perceive the court system to be of littl e

use (Hay and Shleifer 1998 ; Sergeyev 1998) . The Russian and foreign press is replete with high profil e

stories of inefficiencies, corruption, and incompetence in the Russian courts . Still, one may ask if these

cases are typical .

The courts in Russia suffer from many problems, but studies of the performance of Russian court s

on a day-to-day basis suggest that they may not be as ineffective as many believe . Pistor (1996) and

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Hendley, Murrell, and Ryterman (2000) argue that Russian courts perform much better than th e

conventional wisdom suggests .

To gain some perspective on the performance of Russian courts relative to other state institution s

in Russia, we asked firms to rate the performance of the following political institutions on a scale of 1-5 ,

with 1 being very poor and 5 being very high .

Table 3 . Ratings of Political Institution s

Performance on a Scale of 1- 5

Tax Inspectorate 3 .3 1( .92)

The Arbitration Court 3 .19( .93)

' The Tax Police 3 .17(1 .0)

The President 3.08(1 .0 )

Regional Government 3 . 0( .94)

Regional Bureaucracy 2.99( .94)

Federal Bureaucracy 2 .83( .83)

The Court of General Jurisdiction 2 .82( .82)

Court Bailiff 2 .75(1 .12)

Regional Duma 2 .75( .88 )

The Federal Government 2.72( .98)

The Police 2.64( .90)

The Duma 2.3 1( .99)

Means reported with standard errors in parentheses .

Despite widespread criticism of the performance of the court system in Russia generally, the stat e

arbitration courts that handle most economic disputes receive fairly high ratings from the firm managers .

Only the State Tax Inspectorate gets ratings higher than those received by the state arbitration courts .

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Most interestingly, the arbitration court receives higher marks than the courts of general jurisdiction,

indicating that respondents differentiate between the two institutions.

The weakness of the Russian court system seems to reside more with the enforcement o f

decisions than with the operation of the arbitration courts per se . Firm managers scored the performance

of court bailiffs significantly lower than the state arbitration courts (2 .7 versus 3 .2 on a scale of 1-5). The

next section underscores enforcement as a weak link in the Russian court system, particularly in case s

involving the local or regional government .

Courts and the state

A central component of creating a strong legal environment is widespread belief that courts ca n

constrain the government (North 1990 ; North and Weingast 1989 ; North and Weingast 1998) . If

businesses have little confidence that courts can compel the government to abide by judicial decisions tha t

the government finds inconvenient, they will tend to view their property rights as insecure and reduc e

investment (Frye 2000b) .

Results from the survey indicate that businesses believe that state arbitration courts are far les s

effective in protecting their rights when the state is a party to the case than when it is not . We asked firms

"in the case of an economic dispute with the local or regional government do you believe that the court s

could protect your legal interests?" We then asked firms "in the case of an economic dispute with a

business partner do you believe that the courts could protect your legal interests?" We also asked a

related question concerning enforcement of decisions that go against the local or regional government an d

against private business . We sought to determine whether businesses believed that that the local an d

regional government or a business partner would be more or less likely to abide by an inconvenien t

judicial decision .

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Table 4 . Courts and the Stat e

% Responding Yes

Courts can defend interests agains tlocal/regional government

49(50 )

Courts can defend interests against busines spartner

68(46)

Courts can ensure compliance if decision goesagainst the local/regional government

3 8(48)

Courts can ensure compliance if decision goesagainst a business partner

84(36)

Means reported with standard errors in parentheses .

These findings suggest that firms believe that local and regional governments are far less likely t o

abide by judicial decisions than are private businesses . The vast majority of businesses believe that the

courts can protect their interests (68%) and enforce decisions (84%) in cases involving other privat e

businesses . However, far fewer businesses believe that the courts can protect their interests (49%) an d

enforce decisions (38%) in cases involving the local or regional government . Again, these results imply

that firm managers do not believe that state arbitration courts per se work badly . Instead, they strongly

suggest that firm managers recognize the weakness of the courts vis-a-vis the state, but not in case s

involving other private firms. Thus, attempts to improve the legal climate in Russia should devot e

considerable attention to limiting the power of the local and regional government to disregard lega l

decisions ,

Differences among cities

Observers are often quick to make broad claims about the business climate in Russia as on e

undifferentiated whole . Yet, Russia's 89 regions sweep across 11 time zones, and one might expect th e

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business climate to differ significantly across these regions . When more discerning observers do draw

distinctions among regions, they tend to argue that the legal and regulatory environment in Moscow i s

probably more conducive to business than in other regions, because Moscow is the financial capital of th e

country and has drawn the lion's share of investment .

Our survey provides evidence bearing on these assertions . We asked firm managers in each city

to rate the perceived performance of their regional arbitration court, the probability that courts can protec t

their interests in cases involving the local or regional government, and the probability that courts can

enforce decisions in cases involving the local or regional government . We also asked firm manager s

whether or not they had been involved in a legal dispute with the local or regional government in the las t

two years . Table 5 reports the results .

Table 5 . The Legal Environment Across Citie s

Performance o fArbitration Court(1-5 scale)

Courts canprotect rights incases withlocal/regionalgovernment(% yes)

Courts canenforce decision sin cases withlocal/regionalgovernmen t(% yes)

Had a legaldispute with thelocal/regionalgovernment inthe last two years(%yes)

Moscow 3.2 48 36 66Nizhnii Nov . 3 .1 46 33 63Novgorod 3.5 47 44 43Smolensk 3.2 34 34 49Tula 3.2 50 29 66Ufa 3.3 61 46 40Voronezh 2.9 54 40 47Ekaterinburg 3 .3 53 38 47Sample Means 3.2

_ 49 38 56

Responses in the first column find that firms give consistent marks to the performance o f

arbitration courts across regions . Courts are perceived to perform somewhat worse in Voronezh (2 .9 on a

scale of 1-5) and somewhat better in Novgorod (3 .5 on a scale of 1-5), but there is little difference in th e

perceived performance of courts across other regions . Firm managers in most cities report that th e

performance of state arbitration courts is relatively close to the national average (3 .2 on a scale of 1-5) .

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In contrast, in disputes involving the local or regional government, considerable difference s

existed across regions . Firms are particularly likely to have had disputes with the local or regiona l

government in Tula (66%) and Nizhnii Novgorod (63%) . In contrast, fines in Novgorod (43%) and Ufa

(40%) are far less likely to have tangled with the local or regional government on a legal matter . Again ,

firms in Ufa and Novgorod reported stronger expectations that courts can enforce decisions taken agains t

the city or regional government than the national average (46% and 44% respectively) . And, firms in

Tula and Nizhnii Novgorod reported substantially lower rates than the national average (29% and 33 %

respectively) . Thus, firms report significant variations across cities in the legal environment when lega l

disputes involved the city or local government .

The ratings for the legal environment in Moscow tend to be very close to the national average .

Firms in Moscow report a somewhat higher probability of having had a dispute with the local governmen t

than other firms (66% to 56%), but responses to other questions do not differ significantly from th e

national average. Thus, despite claims that "Moscow is not Russia," there is some evidence that firms i n

Moscow and elsewhere in the country have similar views about the performance of the legal system .

Federal versus regional response s

There is broad consensus that corruption and crime are significant problems in Russia However ,

there is far less agreement as to what level of government should be given primary responsibility t o

address these issues . Some argue that the federal government has the most resources to apply to this task .

The federal government has greater economies of scope and scale than do other levels of government an d

therefore is better positioned to root out corruption and reduce crime. Others make the case that regional

or local governments can take advantage of local knowledge and therefore should be assigned th e

dominant position in battling corruption and crime .

Of course, it is possible that firms in Moscow have higher expectations about the performance of courts than thei rcounterparts elsewhere in the country . Thus, it may be the case that the legal environment is better in Moscow thanrespondents report . This possibility requires further research .

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To gain insight into this debate, we asked the firms in our sample : "What branch of government

should play the lead role in trying to fight corruption?" Similarly, we asked : "What branch o f

government should play the lead role in trying to reduce crime? "

Table 6. Corruption, Crime and the Federal Governmen t

FightCorruption

ReduceCrime

FederalGovernment

62 .6 42 .4

RegionalGovernment

19 .4 24 . 0

MunicipalGovernment

17 .4 32 .7

Means reporte d

These results suggest that businesses have far greater confidence in the ability of the federa l

government to handle these tasks than other levels of government . By an almost 3-1 margin, firm

managers believed that the federal government should lead the fight against corruption . By an almost 2- 1

margin, these respondents believed that the federal government should play the dominant role in reducin g

crime. Thus, there seems to be considerable skepticism about the value of decentralization in the figh t

against corruption and crime .

At various points in the last year officials in the Putin administration have floated the idea tha t

governors should be appointed by the President rather than elected by the voters . We asked firm

managers whether they preferred that governors be elected by the people or appointed by the President .

Table 7 reports the results . While firm managers express support for the federal government assumin g

the lead role on crime and corruption issues, 66% remain opposed to allowing the President to appoin t

governors.

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Table 7 . Electing or Appointing Governors

Regional Governors shoul dbe

% responding yes

Elected by the people 66

Appointed by the President 34

. Further analysis is required to determine the proper interpretation of these results . On the one

hand, for those who place elections as the paramount feature of democracy it may be encouraging tha t

there is substantial support for continuing elections to the post of governor . The existence of a significan t

minority that favors granting the President the power to appoint governors, however, may temper th e

enthusiasm of those who equate elections with democracy .

Investment factors

The lack of investment in Russian firms is often cited as a critical problem . Both private and

public investment have plunged in recent years. Yet, there are indications that the devaluation of th e

ruble, manageable levels of inflation, and high prices for oil have increased the rate of investment b y

Russian firms in 2000 . We asked the respondents : "Is your firm planning to make a substantia l

investment in your firm in the coming year?" Thirty-three percent of firms responded yes . To examine

the factors that influenced decisions to make such an investment, we conducted a somewhat mor e

sophisticated multivariate analysis. Thus, we can examine the independent effect of factors that may

influence the decision to invest, holding the effects of other factors constant .

To conduct this analysis I regressed the probability that a firm was planning to make a substantia l

investment in the coming year on the following independent variables : 1) membership in a business

organization ; 2) each firm's rating of the performance of the arbitration court ; 3) the type of firm ; 4) the

size of the firm; 5) the property type of the firm; 6) the profitability of the firm; and 7) the city in which

the firm was located . Table 8 reports the results .

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Table 8: The Determinants of Planned Investmen t

Membership in a Business .63** *

Organization ( .11 )Rating of the Performance of .12*

Arbitration Court ( .06)

Profit in 1999 .35 *( .20)

Privatized Firm -.10( .38)

Number of Employees .00* *( .00)

Type of Firm .03( .02)

Moscow -.19* *(08)

Ekaterinburg .61** *( .05 )

Nizhnii Novgorod .25** *( .07)

Smolensk - .43** *( .08)

Tula .35** *( .06)

Ufa .48***( .06)

Voronezh .84** *( .11 )

Constant -1 .2* *( .60)

* ** ***, significant at the .1, ..05. . and . .01 levels respect ively

Number of observations = 354, Prob> chi2 =.000

Logistic Regression, Log Likelihood -216 .24Robust standard errors adjusted for clustering on cityThe dependent variable is the probability that a firm plans to make a significan t

investment in the coming year .

The results of this analysis suggest that membership in a business organization and confidence i n

the performance of state arbitration courts are positively associated with plans to make new investment s

in the next year, controlling for a range of factors, such as the size, type, profitability, and the city in

which a firm is located. Firms that were members of a business organization were significantly mor e

likely to be planning to make a substantial investment in the coming year than were firms that were not

members of a business organization . In addition, there is a positive association between a firm manager 's

1 3

rating of the performance of the state arbitration courts and the probability that a firm is planning to mak e

a major investment in the coming year . That is, firm managers who believed that the courts worked wel l

were significantly more likely to be planning a major investment for 2001 than firm managers wh o

believed that the courts worked poorly . These results suggest the value of encouraging the creation o f

business organizations and strengthening the performance of state arbitration courts to spur investment .

Caveats

It is important to note that these survey results capture only a snapshot of a dynamic environment .

The surge in oil prices over the last 18 months, the drastic devaluation of the ruble, and fluctuatin g

international economic conditions have brought significant changes to the Russian economy that could b e

reflected in firms' views of the legal environment . Moreover, the Putin administration is in the midst o f

an attempt to overhaul relations between business and the state . This report may provide a useful baselin e

from which to measure the future progress of these efforts . But one should also bear in mind that th e

results reported here are likely to change in the coming years .

It is also important to note that the results presented here await more sophisticated statistica l

analysis . For example, it may be that the differences in the legal environment across regions may grow or

shrink when proper statistical controls are added to the analysis . For example, differences across region s

may be less important than the size or type of firm. Where firms of a particular size or type dominate in a

given city, the size or type of firm may be masking the effects of location within a given city .

Future work on this project involves more refined statistical analysis in addition to several in -

depth case studies of the legal environment in particular regions to be conducted in 2001 . The projec t

also aims to repeat the survey in the future to gain some measures of progress or the lack thereof in

promoting legality in Russia .

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Conclusion

The survey not only provides a more nuanced view of the legal environment in Russia ; it also

provides some broad guidelines for strengthening legality . First, firm managers report that courts work

fairly well when the case involves only private actors, but poorly when the local or regional government

is a party to the case . This suggests that political, rather than technical, factors are the most significan t

obstacles to developing strong legal institutions in Russia .

Second, the legal environment in Russia is not uniformly weak. Some cities, such as Novgorod

and Ufa, seem to have been somewhat more successful in building a legal environment in which

businesses can expect courts to protect their interests against the local or regional government . Other

cities, such as Nizhnii Novogorod and Tula, seem to be performing less well . In-depth case studies and

additional statistical analyses are required before we can plumb these differences across region more

thoroughly .

Third, firm managers are much more likely to prefer the federal, rather than the regional or city

government, to take the lead in efforts to reduce corruption and crime. Firm managers seem to b e

somewhat skeptical of decentralized solutions to these problems . This result is at odds with frequent call s

for empowering lower levels of government to root out corruption and reduce crime .

Finally, there is evidence that institutional change can raise rates of investment . Firm managers

who are members of business organizations are more likely to be planning a major investment in th e

coming year. Similarly, firm managers who have high opinions of the performance of state arbitration

courts are more likely to be planning to invest . Thus, efforts to strengthen these institutions may be worth

undertaking in hopes of spurring investment by Russian firms.

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References and related literature

Carothers, Thomas, 1998 . "The Rule of Law Revival, " Foreign Affairs, 77:2, 95-106 .

Diermeier, Daniel, Joel Ericson, Timothy Frye and Steven Lewis, 1997 . "Credible Commitment andProperty Rights : The Role of Strategic Interaction Between Political and Economic Actors," in ThePolitical Economy of Property Rights, ed. Dave Weimer, (New York: Cambridge University Press) .

European Bank for Reconstruction and Development . 1999. Transition Report, 1999 . (London : EBRD) .

Frye, Timothy and Ekatherina Zhuravskaya, Fall 2000 . "Rackets, Regulation and the Rule of Law, "Journal of Law, Economics, and Organization .

Frye, Timothy, 2000a. Brokers and Bureaucrats : Building Market Institutions in Russia, (Ann Arbor :University of Michigan Press) .

Frye, Timothy, 2000b . "Can You Fight City Hall? Endogenous and Exogenous Commitment to Propert yRights," ms . Columbus, OH .

Gray, Cheryl W . and Kathryn Hendley, "Developing Commercial Law in Transition Economies :Examples from Hungary and Russia," in The Rule of Law and Economic Reform in Russia, ed. Jeffrey D .Sachs and Katharina Pistor, (Boulder, CO : Westview Press) .

Hay, Jonathan R. and Andrei Shleifer, 1998 . "Private Enforcement of Public Law : A Theory of LegalReform," American Economic Review, Vol 88 (2), pp. 398-403 .

Hellman, Joel, Gerant Jones, Daniel Kaufman, 2000 . "Seize the State, Seize the Day," World BankWorking Paper, ms. Washington, D .C. World Bank .

Hendley, Kathryn, Peter Murrell and Randi Ryterman, 2001 . "Do Law and Legal Institutions Facilitatethe Transactional Activities of Russian Enterprises?" in The Value of the Rule of Law in Transitio nEconomies, ed. Peter Murrell and Kathryn Hendley, (Ann Arbor : University of Michigan Press) .

Johnson, Simon, Daniel Kaufmann, and Andrei Shleifer, 1998b . "The Unofficial Economy in Transition, "Brookings Papers On Economic Activity, (2), pp . 159-239 .

Kaufmann, Daniel and Aleksander Kaliberda, 1996 . "Integrating the Unofficial Economy into theDynamics of Post-Socialist Economies," Economic Transition in Russia and the New States of Eurasia ,ed. Bartlomiej Kaminski, (Armonk, NY: M.E. Sharpe), pp . 81-120 .

Ledeneva, Alena, 1998, Russia 's Economy of Favours : Blat, Networking and Informal Exchange,(Cambridge UK; Cambridge University Press) .

North, Douglass, and Barry Weingast, 1989 . "Constitutions and Commitment: The Evolution o fInstitutions Governing Public Choice in 17th Century England," Journal of Economic History 49 : 809-832 .

North, Douglass, and Barry Weingast, 1998 . "Limited Government and Liberal Markets : An Introductio nto 'Constitutions and Commitment'," in The Origins of Liberty: Political and Economic Liberalization i nthe Modern World, ed. Paul Drake and Mathew McCubbins, (Princeton : Princeton University Press), 13 -15 .

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North, Douglass, 1990 . Institutions, Institutional Change, and Economic Performance, (Cambridge :Cambridge University Press) .

Pistor, Katharina, 1996 . "Supply and Demand for Contract Enforcement in Russia : Courts, Arbitration,and Private Enforcement," Review of Central and East European Law, 22, 1-55 .

Sergeyev, Victor, 1998 . The Wild East : Crime and Lawlessness in Post-Communist Russia, (Armonk,NY: ME Sharpe) .

Weingast, Barry, 1997 . "The Political Commitment to Markets and Marketization," in The PoliticalEconomy of Property Rights, ed. David L. Weimer, (Cambridge : Cambridge University Press) .

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