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Informal Contracts in Transition Economies: A Dynamic Approach

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  • Ingster Anna

Abstract

In a transition economy, many of employee/employer's contracts are informal, rather than formal. Even in cases when formal contracts concluded, external legal enforcement of a contract often appears to be imperfect and costly. Sometimes, this brings to the employer the opportunity to 'deceive' the employee, paying him a lower salary than he had expected ex-ante. Underdevelopment of the judiciary system and weak enforcement of courts decisions make this problem more serious, and at the same time more difficult to resolve. The current paper provides a positive model of deception at labor markets.

Suggested Citation

  • Ingster Anna, 2003. "Informal Contracts in Transition Economies: A Dynamic Approach," EERC Working Paper Series 03-05e, EERC Research Network, Russia and CIS.
    • Handle: RePEc:eer:wpalle:03-05e
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    References listed on IDEAS

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    Cited by:

    1. Maxim Bouev, 2005. "State Regulations, Job Search and Wage Bargaining: A Study in the Economics of the Informal Sector," William Davidson Institute Working Papers Series wp764, William Davidson Institute at the University of Michigan.
    2. Olivia Anku-Tsede, 2014. "Maintaining Order in the Microfinance Sector in Ghana," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 4(3), pages 387-403, March.

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    More about this item

    Keywords

    Russia; informal contracts; deception; imperfect enforcement; transition;
    All these keywords.

    JEL classification:

    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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