The Russian Detour: Real Transition in a Virtual Economy?

Abstract

Illustrates the creation of a market economy by showing that no easy procedures automatically lead to that goal; the Russian forest sector is used as a model for all Russian industries. The major obstacle for the forest sector is the existing institutional framework consisting of both formal & informal rules. In Russia, the institutional system adversely affects the new & more market-oriented institutions. Indeed, multiple problems undermine the Russian forest industry. Laws are often ignored, property rights are ill defined, the market does not always determine value, & authorities often fail to prosecute violations of laws. Through a comparative study of the Russian & Swedish forest industries the authors reveal that Russian firms lack funding & bank support, they are more burdened by taxes, & trading is marred by contract violations. Further complicating the issue is Russia's overlapping jurisdictions; the forest sector is regulated by three levels of rules. Consequently, the problems must be solved at three different levels