Sticks or Carrots? Comparing Effectiveness of Government Informal Economy Policies in Russia
| Autor: | Alexander Libman, Janis N. Kluge |
|---|---|
| Rok vydání: | 2017 |
| Předmět: |
Economics and Econometrics
Government Informal sector Corruption media_common.quotation_subject 05 social sciences Principle of legality 0506 political science Supply and demand Market economy Incentive 0502 economics and business 050602 political science & public administration Economics Sanctions Bureaucracy 050207 economics media_common |
| Zdroj: | Comparative Economic Studies. 60:605-637 |
| ISSN: | 1478-3320 0888-7233 |
| Popis: | Which incentives have the strongest impact on the size of the informal economy? Is it about government’s pressure against entrepreneurs operating in this sector, or is it about the benefits of legality? The goal of this paper is to explicitly contrast the role of sticks (court repressiveness) and carrots (financial aid to small- and medium-sized firms) as factors determining the size of the informal economy, using the case of the Russian taxi market. It uses a unique dataset of taxi licensing data from regional transport departments and indicators for taxi market demand and supply to estimate the extent of informal business. When controlling for market demand and supply, it finds a strong and robust positive effect of sanctions on the size of the official market, with higher repressiveness leading to a smaller informal economy. In contrast, the effect of carrots was insignificant. The results suggest that the effectiveness of carrot policies is compromised when entrepreneurs operate informally to avoid dealing with corrupt bureaucrats and have low trust in the government. |
| Databáze: | OpenAIRE |
| Externí odkaz: |
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