Skip to main content

Institutional Transformation and Informality in Azerbaijan and Georgia

  • Chapter

Abstract

The end of Soviet rule in the South Caucasus was followed by a decade of economic and political instability. Failed democratization and stalled transition to a market economy encouraged the continuity of informal socio-economic practices deeply rooted during the Soviet period. In the immediate post-communist period, people in the South Caucasus widely employed informal practices both as private safety nets in daily life and as long-term coping mechanisms, which, due to the weakness of state institutions, were often indispensable. The reliance on informal structures, rather than on formal institutions, in the 1990s was as widespread as in many other former Soviet regions. However, due to the economic growth and political transitions of the last decade in Azerbaijan and Georgia, the region’s socio-economic and socio-political landscapes have begun to change. Yet, little is known regarding the extent to which the institutional transformation and formalization are challenging the importance of the informal sector: inter-personal connections, reciprocal exchanges of favours, individual informal networks, informal entrepreneurship and other forms of informal relations in the former Soviet Union (fSU). With a primary focus on two case studies — Azerbaijan and Georgia — this chapter examines the relationship between informality and institution-building in the post-communist South Caucasus.

Keywords

  • Civil Society
  • Informal Sector
  • Formal Institution
  • Shadow Economy
  • Informal Economy

These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

This is a preview of subscription content, access via your institution.

Buying options

Chapter
USD   29.95
Price excludes VAT (USA)
  • DOI: 10.1057/9781137483072_3
  • Chapter length: 19 pages
  • Instant PDF download
  • Readable on all devices
  • Own it forever
  • Exclusive offer for individuals only
  • Tax calculation will be finalised during checkout
eBook
USD   89.00
Price excludes VAT (USA)
  • ISBN: 978-1-137-48307-2
  • Instant PDF download
  • Readable on all devices
  • Own it forever
  • Exclusive offer for individuals only
  • Tax calculation will be finalised during checkout
Hardcover Book
USD   119.99
Price excludes VAT (USA)

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  • Abdih, Y. and M. Leandro (2013) Measuring the Informal Economy in the Caucasus and Central Asia, IMF Working Paper, International Monetary Fund.

    Google Scholar 

  • Alekseeva, L. (2001) Istoriia inakomysliia v SSSR: Noveishii Period, Moscow: Zatsepa.

    Google Scholar 

  • Aliyev, H. (2013) Post-communist informal networking: Blat in the South Caucasus, Demokratizatsiya: The Journal of Post-Soviet Democratization, 21(1), 89–112.

    Google Scholar 

  • Aliyev, H. (2014b) Civil society in the South Caucasus: Kinship networks as obstacles to civil participation, Journal of Southeast European and Black Sea Studies, 14(2), 263–282.

    CrossRef  Google Scholar 

  • Altman, Y. (1983) A Reconstruction Using Anthropological Methods of the Second Economy of Soviet Georgia, Enfield: Middlesex Polytechnic.

    Google Scholar 

  • Apressyan, R. (1997) Business ethics in Russia, Journal of Business Ethics, 16(14), 1561–1570.

    CrossRef  Google Scholar 

  • Bayramov, G. (2012) The Shadow Economy in Azerbaijan: Size and Causes, Oslo: Norwegian Institute of International Affairs (NUPI).

    Google Scholar 

  • Börzel, T. and Y. Pamuk (2011) Europeanization Subverted? The European Union’s Promotion of Good Governance and the Fight against Corruption in the Southern Caucasus, KFG Working Paper Series, April (26).

    Google Scholar 

  • Chen, M. (2006) Rethinking the informal economy: Linkages with the formal economy and the formal regulatory environment. DESA Working Paper No.6. New York: United Nations Department of Economic and Social Affairs.

    Google Scholar 

  • Chong, A. and M. Gradstein (2007) Inequality and informality, Journal of Public Economics, 91, 159–179.

    CrossRef  Google Scholar 

  • Closson, S. (2012) Networks of profit in Georgia’s autonomous regions: Challenges to statebuilding, Journal of Intervention and Statebuilding, 4(2), 179–204.

    CrossRef  Google Scholar 

  • CRRC (2011) An Assessment of Social Capital in Georgia, Tbilisi: Caucasus Research Resource Centers.

    Google Scholar 

  • CRRC (2013) Caucasus Barometer, Tbilisi: Caucasus Research Resource Centers.

    Google Scholar 

  • Dershem, L. and D. Gzirishvili (1998) Informal social support networks and household vulnerability: Empirical findings from Georgia, World Development, 26(10), 1827–1838.

    CrossRef  Google Scholar 

  • de Soto, H. (2000) The Mystery of Capital, New York: Basic Books.

    Google Scholar 

  • EBRD (2011) Life in Transition. After the Crisis, London: European Bank for Reconstruction and Development.

    Google Scholar 

  • EBRD. (2012) Life in Transition, London: European Bank for Reconstruction and Development.

    Google Scholar 

  • Evans, A. (2006) Civil society in the Soviet Union?, in Evans, A., Henry, L. and McIntosh, L. (eds.) Russian Civil Society: A Critical Assessment, Armonk: M. E. Sharpe, pp. 28–54.

    Google Scholar 

  • Feldbrugge, F. (1984) Government and shadow economy in the Soviet Union, Soviet Studies, 36(4), 528–543.

    CrossRef  Google Scholar 

  • Gaughan, J. and L. Ferman (1987) Toward an understanding of the informal economy, Annals of the American Academy of Political and Social Science, 493, 15–25.

    CrossRef  Google Scholar 

  • Gërxhani, K. (2004) The informal sector in developed and less developed countries: A literature survey, Public Choice, 120(3/4), 267–300.

    CrossRef  Google Scholar 

  • Greenslade, G. (1980) Regional Dimensions of the Legal Private Economy in the USSR, Berkeley: National Council for Soviet and East European Research.

    Google Scholar 

  • Hart, K. (2006) Bureaucratic form and the informal economy, Oxford Scholarship Online, September 2006, 21–35.

    Google Scholar 

  • Howard, M. (2003) The Weakness of Civil Society in Post-Communist Europe, Cambridge: Cambridge University Press.

    CrossRef  Google Scholar 

  • Kaiser, R. (1976) Russia: The People and the Power, New York: Atheneum.

    Google Scholar 

  • Karatnycky, A., A. Motyl and C. Graybow (1999) Nations in Transit, 1998. Civil Society, Democracy, and Markets in East Central Europe and the Newly Independent States, New Brunswick: Transaction Publishers.

    Google Scholar 

  • Kim, B.-Y. and Y. Koh (2011) The informal economy and bribery in North Korea, Asian Economic Papers, 10(3), 104–117.

    CrossRef  Google Scholar 

  • Ledeneva, A. (1998) Russia’s Economy of Favours: Blat, Networking, and Informal Exchange, Cambridge: Cambridge University Press.

    Google Scholar 

  • Loayza, N. (1997) The Economics of the Informal Sector. A Simple Model and Some Empirical Evidence from Latin America, Policy Research Working Paper, Washington, DC: World Bank.

    Google Scholar 

  • Loayza, N., A-M. Oviedo and L. Serven (2005) The Impact of Regulation on Growth and Informality: Cross-Country Evidence, Washington, DC: World Bank.

    CrossRef  Google Scholar 

  • Mars, G. and Y. Altman (1983) The cultural bases of Soviet Georgia’s second economy, Soviet Studies, 35(4), 546–560.

    CrossRef  Google Scholar 

  • Mars, G. and Y. Altman (1992) A case of a factory in Uzbekistan: Its second economy activity and comparison with a similar case in Soviet Georgia, Central Asian Survey, 11(2), 101–111.

    CrossRef  Google Scholar 

  • Morris, J. and A. Polese (eds.) (2014) The Informal Post-Socialist Economy: Embedded Practices and Livelihoods, New York: Routledge.

    Google Scholar 

  • Nodia, G. (2005) Civil Society Development in Georgia: Achievements and Challenges, Tbilisi: Caucasus Institute for Peace, Democracy and Development.

    Google Scholar 

  • North, D. (1990) Institutions, Institutional Change and Economic Performance, New York: Cambridge University Press.

    CrossRef  Google Scholar 

  • Polese, A. (2008) ‘If I receive it, it is a gift: If I demand it, then it is a bribe’: On the local meaning of economic transactions in post-Soviet Ukraine, Anthropology in Action, 15(3), 47–60.

    CrossRef  Google Scholar 

  • Rasanayagam, J. (2011) Informal economy, informal state: The case of Uzbekistan, International Journal of Sociology and Social Policy, 31(11/12), 681–696.

    Google Scholar 

  • Reshetnikov, O. (2009) Neformalnie ob’edinenia v SSSR v godi perestroiki [Informal Groups in the USSR during Perestroika], Vlast, 2009(11), 26–28.

    Google Scholar 

  • Rinnert, D. (2012) The political economy of Georgia’s transformation: Before and after the Rose Revolution. IFAIR Analysis. Berlin: Young Initiative on Foreign Affairs and International Relations.

    Google Scholar 

  • Sampson, S. (1987) The second economy of the Soviet Union and Eastern Europe, The ANNALS of the American Academy of Political and Social Science, 493(120), 120–136.

    CrossRef  Google Scholar 

  • Schneider, F. (2004) The Size of the Shadow Economies of145 Countries all over the World: First Results over the Period 1999 to 2003, Bonn: Institute for the Study of Labor.

    Google Scholar 

  • Schneider, F., A. Buehn and C. Montenegro (2010) Shadow Economies All over the World. New Estimates for162 Countries from 1999 to 2007, Washington, DC: The World Bank.

    Google Scholar 

  • Shubin, A. (2006) Predannaia Demokratiia: SSSR i neformaly (1986–1989ee g.g.), Moscow: Evropa.

    Google Scholar 

  • Sik, E. (1992) From the second to the informal economy, Journal of Public Policy, 12(02), 153–175.

    CrossRef  Google Scholar 

  • Thießen, U. (1997) The informal economy in eastern Europe: The example of the Ukraine, Economic Bulletin, 34(6), 19–24.

    CrossRef  Google Scholar 

  • Torosyan, K. and K. Filler (2012) Tax Reform in Georgia and the Size of the Shadow Economy, Bonn: Institute for the Study of Labor (IZA).

    Google Scholar 

  • Turner, J. (2004) Human Institutions: A Theory of Societal Evolution, Lanham: Rowman and Littlefield.

    Google Scholar 

  • Valiyev, A. (2011) Social capital in Azerbaijan: Does it help to build democracy? Caucasus Analytical Digest, November (31), 11–13.

    Google Scholar 

  • Walker, C. and S. Habdank-Kos¸aczkowska (2013) Nations in Transit. Fragile Frontier: Democracy’s Growing Vulnerability in Central and Southeastern Europe, Washington, DC: Freedom House.

    Google Scholar 

Download references

Authors

Editor information

Editors and Affiliations

Copyright information

© 2015 Huseyn Aliyev

About this chapter

Cite this chapter

Aliyev, H. (2015). Institutional Transformation and Informality in Azerbaijan and Georgia. In: Morris, J., Polese, A. (eds) Informal Economies in Post-Socialist Spaces. Palgrave Macmillan, London. https://doi.org/10.1057/9781137483072_3

Download citation