No Cash and No Purse: Explaining Non-Monetary Trade in Russia in the 1990s

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2004-11-01

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Why were most transactions in the Russian industry in the 1990s carried out without the use of money? Theories explaining the phenomenon, when carefully assessed, seem to have missing gaps in the argument or inadequate evidence. The present paper critically reviews the theories, suggests neglected considerations, proposes an alternative explanation, and empirically tests the hypothesis.

A large representative sample of Russian firms is used in the empirical part. TOBIT analysis shows that firms start to use non-monetary payments because of their liquidity problems. Further use of non-monetary payments is connected to kartoteka, a tax collection method of withdrawal of taxes from the firm's bank account.

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