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Violent Pressure on Business and the Size of the Informal Economy: Evidence from Russian Regions

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The Informal Economy in Global Perspective

Part of the book series: International Political Economy Series ((IPES))

Abstract

Does violent pressure on business influence the decision of firms to stay in the informal economy? Using evidence from Russian regions, this chapter finds that the result depends on the type of violence. Physical violence in a given region is positively correlated with the number of people working outside the corporate sector, but negatively with the degree of competition from the informal sector. On the other hand, insecure property rights for entrepreneurs and investors increase the amount of competition from the informal economy. These findings are consistent with a theory where firms seek the protection of the formal economy against different types of physical violence in regions with decentralized predation, but hide in the informal economy against predatory state officials and corporate raiders in regions where predation is centralized.

This chapter was originally written as a paper for the IAPP Summer School “Multiple Moralities and Shadow Economies in Post-Socialism” held in Zagreb, Croatia 29 August 29–1 September 2015. I want to thank Galina Belokurova for permission to use her data on violence against businessmen.

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Authors and Affiliations

  1. Higher School of Economics, Moscow, Russia

    Michael Rochlitz

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  1. Michael Rochlitz
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Correspondence to Michael Rochlitz .

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Editors and Affiliations

  1. Dublin City University, School of Law and Government, Dublin, Ireland

    Abel Polese

  2. University of Sheffield, Management School, Sheffield, United Kingdom

    Colin C. Williams

  3. Alexandru Ioan Cuza University of Iași Faculty of Economics and Business Administration, Iași, Romania

    Ioana A. Horodnic

  4. Institute of Public Finance, Zagreb, Croatia

    Predrag Bejakovic

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Rochlitz, M. (2017). Violent Pressure on Business and the Size of the Informal Economy: Evidence from Russian Regions. In: Polese, A., Williams, C., Horodnic, I., Bejakovic, P. (eds) The Informal Economy in Global Perspective. International Political Economy Series. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-40931-3_10

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