IDEAS home Printed from https://ideas.repec.org/p/hal/cesptp/hal-03595504.html
   My bibliography  Save this paper

Debt Overhang and Barter in Russia

Author

Listed:
  • Mathilde Maurel

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

  • Igor Makarov

    (MIT Sloan - Sloan School of Management - MIT - Massachusetts Institute of Technology)

  • Sergei Guriev

    (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique)

Abstract

In this Paper we study, both theoretically and empirically, the relationship between barter and the indebtedness of Russian firms. We build a model in which a firm uses barter to protect its working capital against outside creditors even when barter involves high transaction costs. The main innovation of our work is to allow renegotiation between the firm and its creditors. If the creditors are rational, they often agree to postpone debt payments in order to avoid destroying the firm's working capital. It turns out, however, that even if the firm cannot ensure it will not divert cash ex post, the outcome of renegotiation still provides ex ante incentives to use barter. We show that the greater the debt overhang, the more likely the use of barter, and although the possibility of debt restructuring reduces barter, it does not eliminate it altogether. We also discuss the role of the government bond market and weak bankruptcy legislation. The firm-level evidence from two independent surveys is consistent with the model's predictions.

Suggested Citation

  • Mathilde Maurel & Igor Makarov & Sergei Guriev, 2002. "Debt Overhang and Barter in Russia," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-03595504, HAL.
  • Handle: RePEc:hal:cesptp:hal-03595504
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Other versions of this item:

    References listed on IDEAS

    as
    1. S. Aukutsionek, 1998. "Barter in the Russian Industry," Voprosy Ekonomiki, NP Voprosy Ekonomiki, vol. 2.
    2. Lubomir Lizal & Jan Svejnar, 1997. "Enterprise Investment During the Transition: Evidence from Czech Panel Data," William Davidson Institute Working Papers Series 60, William Davidson Institute at the University of Michigan.
    3. Lorena Barberia & Simon Johnson & Daniel Kaufmann, 1997. "Social Networks in Transition," William Davidson Institute Working Papers Series 102, William Davidson Institute at the University of Michigan.
    4. Guriev, Sergei & Kvassov, Dmitri, 2004. "Barter for price discrimination," International Journal of Industrial Organization, Elsevier, vol. 22(3), pages 329-350, March.
    5. Mark C. Foley, 1997. "Determinants of Unemployment Duration in Russia," William Davidson Institute Working Papers Series 81, William Davidson Institute at the University of Michigan.
    6. Roger C. Kormendi & Karen Schnatterly, 1996. "Bank Privatization in Hungary and the Magyar Kulkereskedelmi Bank Transaction," William Davidson Institute Working Papers Series 3, William Davidson Institute at the University of Michigan.
    7. Brana, S. & Maurel, M., 1999. "Barter in Russia : Liquidity Shortage Versus Lack of Restructuring," Papiers d'Economie Mathématique et Applications 1999.98, Université Panthéon-Sorbonne (Paris 1).
    8. Zhuravskaya, Ekaterina & Lambert-Mogiliansky, Ariane & Sonin, Konstantin, 2000. "Capture of Bankruptcy: Theory and Evidence from Russia," CEPR Discussion Papers 2488, C.E.P.R. Discussion Papers.
    9. Enrico C. Perotti & Octavian Carare, 1996. "The Evolution of Bank Credit Qulity in Transition: Theory and Evidence from Romania," William Davidson Institute Working Papers Series 49, William Davidson Institute at the University of Michigan.
    10. Marin, Dalia & Schnitzer, Monika, 2005. "Disorganization and financial collapse," European Economic Review, Elsevier, vol. 49(2), pages 387-408, February.
    11. Katharina Pistor & Martin Raiser & Stanislaw Gelfer, 2000. "Law and Finance in Transition Economies," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 8(2), pages 325-368, July.
    12. Sergei Aukutsionek, 1998. "Industrial barter in Russia," Post-Communist Economies, Taylor & Francis Journals, vol. 10(2), pages 179-188.
    13. Tito Boeri, 1999. "Transition with Labour Supply," William Davidson Institute Working Papers Series 274, William Davidson Institute at the University of Michigan.
    14. Janos Vincze, 1998. "Chronic Moderate Inflation in Transition: The Tale of Hungary," William Davidson Institute Working Papers Series 176, William Davidson Institute at the University of Michigan.
    15. Shang-Jin Wei, 2000. "How Taxing is Corruption on International Investors?," The Review of Economics and Statistics, MIT Press, vol. 82(1), pages 1-11, February.
    16. Sergei Guriev & Dmitry Kvassov, 2000. "Barter for price discrimination? A theory and evidence from Russia," Working Papers w0007, Center for Economic and Financial Research (CEFIR).
    17. Linz, Susan J, 2000. "Labor Productivity in Transition: A Regional Analysis of Russian Industry," Economic Development and Cultural Change, University of Chicago Press, vol. 48(4), pages 685-718, July.
    18. Mark C. Foley, 1997. "Determinants of Unemployment Duration in Russia," Working Papers 779, Economic Growth Center, Yale University.
    19. Leslie Perlow & Ron Fortgang, 1998. "Commitment, Versatility and Balance: Determinants of Work Time Standards and Norms in a Multi-Country Study of Software Engineers," William Davidson Institute Working Papers Series 149, William Davidson Institute at the University of Michigan.
    20. Dalia Marin & Daniel Kaufmann & Bogdan Gorochowskij, 2000. "Barter in Transition Economies: Competing Explanations Confront Ukranian Data," William Davidson Institute Working Papers Series 287, William Davidson Institute at the University of Michigan.
    21. Susan J Linz & Gary Krueger, 1998. "Enterprise Restructuring in Russia's Transition Economy: Formal and Informal Mechanisms," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 40(2), pages 5-52, July.
    22. Dong, Xiao-Yuan & Putterman, Louis, 2000. "Prereform Industry and State Monopsony in China," Journal of Comparative Economics, Elsevier, vol. 28(1), pages 32-60, March.
    23. Krugman, Paul, 1988. "Financing vs. forgiving a debt overhang," Journal of Development Economics, Elsevier, vol. 29(3), pages 253-268, November.
    24. Foley, Mark C., 1997. "Determinants of Unemployment Duration in Russia," Center Discussion Papers 28427, Yale University, Economic Growth Center.
    25. repec:zbw:bofitp:1999_003 is not listed on IDEAS
    26. Bennett, John & Maw, James, 2000. "Privatisation and market structure in a transition economy," Journal of Public Economics, Elsevier, vol. 77(3), pages 357-382, September.
    27. Chhibber, Pradeep K & Majumdar, Sumit K, 1999. "Foreign Ownership and Profitability: Property Rights, Control, and the Performance of Firms in Indian Industry," Journal of Law and Economics, University of Chicago Press, vol. 42(1), pages 209-238, April.
    28. Li, David D., 1996. "A Theory of Ambiguous Property Rights in Transition Economies: The Case of the Chinese Non-State Sector," Journal of Comparative Economics, Elsevier, vol. 23(1), pages 1-19, August.
    29. Berglof, Erik & Roland, Gerard, 1998. "Soft Budget Constraints and Banking in Transition Economies," Journal of Comparative Economics, Elsevier, vol. 26(1), pages 18-40, March.
    30. Stewart C. Myers & Raghuram G. Rajan, 1998. "The Paradox of Liquidity," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 113(3), pages 733-771.
    31. David D. Li & Shan Li, 1995. "Corporate Debt Crisis and Bankruptcy Law During the Transition: The Case of China," William Davidson Institute Working Papers Series 9, William Davidson Institute at the University of Michigan.
    32. Saul Estrin, 1997. "Privatisation in Central and Eastern Europe," William Davidson Institute Working Papers Series 87, William Davidson Institute at the University of Michigan.
    33. Foley, M.C., 1997. "Determinants of Unemployment Duration in Russia," Papers 779, Yale - Economic Growth Center.
    34. Dong, Xiao-Yuan & Putterman, Louis, 2002. "China's State-Owned Enterprises in the First Reform Decade: An Analysis of a Declining Monopsony," Economic Change and Restructuring, Springer, vol. 35(2), pages 109-139.
    35. Gordon, Roger H & Li, David Daokui, 1997. "Taxes and Government Incentives: Eastern Europe vs. China," CEPR Discussion Papers 1657, C.E.P.R. Discussion Papers.
    36. Clifford Gaddy & Barry W. Ickes, 1998. "To Restructure or Not to Restructure: Informal Activities and Enterprise Behavior in Transition," William Davidson Institute Working Papers Series 134, William Davidson Institute at the University of Michigan.
    37. Hart, Oliver, 1995. "Firms, Contracts, and Financial Structure," OUP Catalogue, Oxford University Press, number 9780198288817.
    38. Wendy Carlin & Steven Fries & Mark Schaffer & Paul Seabright, 2000. "Barter and Non-Monetary Transactions in Transition Economies: Evidence from a Cross-Country Survey," CERT Discussion Papers 0004, Centre for Economic Reform and Transformation, Heriot Watt University.
    39. V. Makarov & G. Kleiner, 1999. "Barter in Russia: Institutional Stage," Voprosy Ekonomiki, NP Voprosy Ekonomiki, vol. 4.
    40. Dong-lai Li, 1993. "The Foreign Economic Contract Law of China: Case and Analysis," William Davidson Institute Working Papers Series 7, William Davidson Institute at the University of Michigan.
    41. Earle, John S. & Peter, Klara Sabirianova, 2000. "Equilibrium Wage Arrears: A Theoretical and Empirical Analysis of Institutional Lock-In," IZA Discussion Papers 196, Institute of Labor Economics (IZA).
    42. Sergei Guriev & Barry Ickes, 2000. "Barter in Russia," Post-Print hal-03567845, HAL.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Fabrizio Coricelli & Isabelle Roland, 2010. "Credit and recessions," Post-Print halshs-00469521, HAL.
    2. Maria Ponomareva & Ekaterina Zhuravskaya, 2004. "Federal tax arrears in Russia Liquidity problems, federal redistribution or regional resistance?," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 12(3), pages 373-398, September.
    3. Babetskaia-Kukharchuk, Oxana & Maurel, Mathilde, 2004. "Russia's accession to the WTO: the potential for trade increase," Journal of Comparative Economics, Elsevier, vol. 32(4), pages 680-699, December.
    4. Kim, Byung-Yeon & Pirttila, Jukka, 2004. "Money, barter, and inflation in Russia," Journal of Comparative Economics, Elsevier, vol. 32(2), pages 297-314, June.
    5. Vasily Astrov & Korkut Boratav & Sandor Richter, 2002. "Monthly Report 05/2002," wiiw Monthly Reports 2002-05, The Vienna Institute for International Economic Studies, wiiw.
    6. Fleischman, Gary & Herz, Paul, 2005. "An empirical investigation of trends in barter activity in the Russian Federation," The International Journal of Accounting, Elsevier, vol. 40(1), pages 39-63.
    7. Dolud, Olena, 2004. "Nichtmonetäre Transaktionen in der ukrainischen Landwirtschaft: Determinanten, Spezifika und Folgen," Studies on the Agricultural and Food Sector in Transition Economies, Leibniz Institute of Agricultural Development in Transition Economies (IAMO), volume 24, number 93080.
    8. Vlad Ivanenko, 2004. "Access to liquidity and non-monetary trade in Russia," Post-Communist Economies, Taylor & Francis Journals, vol. 16(1), pages 21-38.
    9. Richard B. Goud Jr., 2002. "Inter-Firm Non-Monetary Transactions in Russia: A Literature Review," Development and Comp Systems 0207001, University Library of Munich, Germany.
    10. Vahabi, Mehrdad, 2011. "Soft budget constraint and the parastatal sector," MPRA Paper 37926, University Library of Munich, Germany.
    11. Vlad Ivanenko & Dmitry Mikheyev, 2002. "The Role of Non-monetary Trade in Russian Transition," Post-Communist Economies, Taylor & Francis Journals, vol. 14(4), pages 405-419.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Walsh, Patrick Paul & Whelan, Ciara, 2001. "Firm performance and the political economy of corporate governance: survey evidence for Bulgaria, Hungary, Slovakia and Slovenia," Economic Systems, Elsevier, vol. 25(2), pages 85-112, June.
    2. Richard B. Goud Jr., 2002. "Inter-Firm Non-Monetary Transactions in Russia: A Literature Review," Development and Comp Systems 0207001, University Library of Munich, Germany.
    3. Kim, Byung-Yeon & Pirttila, Jukka, 2004. "Money, barter, and inflation in Russia," Journal of Comparative Economics, Elsevier, vol. 32(2), pages 297-314, June.
    4. Sergei Guriev & Dmitry Kvassov, 2000. "Price Discrimination Through Barter: A Theory and Evidence from Russia," Econometric Society World Congress 2000 Contributed Papers 0397, Econometric Society.
    5. Guriev, Sergei & Kvassov, Dmitri, 2004. "Barter for price discrimination," International Journal of Industrial Organization, Elsevier, vol. 22(3), pages 329-350, March.
    6. Sergei Guriev & Dmitry Kvassov, 2000. "Barter for price discrimination? A theory and evidence from Russia," Working Papers w0007, New Economic School (NES).
    7. Kupets, Olga, 2006. "Determinants of unemployment duration in Ukraine," Journal of Comparative Economics, Elsevier, vol. 34(2), pages 228-247, June.
    8. Brana, S. & Maurel, M., 1999. "Barter in Russia : Liquidity Shortage Versus Lack of Restructuring," Papiers d'Economie Mathématique et Applications 1999.98, Université Panthéon-Sorbonne (Paris 1).
    9. Jos?? Noguera & Susan J. Linz, 2005. "Barter, Credit, and Welfare: A theoretical inquiry into the barter phenomenon in Russia," William Davidson Institute Working Papers Series wp757, William Davidson Institute at the University of Michigan.
    10. Vlad Ivanenko & Dmitry Mikheyev, 2002. "The Role of Non-monetary Trade in Russian Transition," Post-Communist Economies, Taylor & Francis Journals, vol. 14(4), pages 405-419.
    11. Vlad Ivanenko, 2004. "Access to liquidity and non-monetary trade in Russia," Post-Communist Economies, Taylor & Francis Journals, vol. 16(1), pages 21-38.
    12. Pieter Serneels, 2004. "The Nature of Unemployment in Urban Ethiopia," CSAE Working Paper Series 2004-01, Centre for the Study of African Economies, University of Oxford.
    13. Camp, Kevin & Waldorf, Brigitte, 2014. "The impact of spatial flexibility on unemployment duration in young college-educated workers," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 170678, Agricultural and Applied Economics Association.
    14. Furmanov, Kirill & Chernysheva, Irina, 2012. "Health and job search in Russia," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 26(2), pages 62-91.
    15. Raul Razo-Garcia, 2011. "The Duration of Intermediate Exchange Rate Regimes and Capital Controls," Carleton Economic Papers 11-01, Carleton University, Department of Economics, revised 17 Oct 2011.
    16. Jose Noguera & Susan Linz, 2003. "A Theoretical Model of Barter in Russia," CERGE-EI Working Papers wp207, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    17. Wooi Chen Khoo & Kim Leng Yeah & Shun Yi Hong, 2022. "Modeling unemployment duration, determinants and insurance premium pricing of Malaysia: insights from an upper middle-income developing country," SN Business & Economics, Springer, vol. 2(8), pages 1-25, August.
    18. Luis Eduardo Arango & Ana María Ríos, 2015. "Duración del desempleo en Colombia: género, intensidad de búsqueda y anuncios de vacantes," Borradores de Economia 12528, Banco de la Republica.
    19. Lizal, Lubomir & Kocenda, Evzen, 2001. "State of corruption in transition: case of the Czech Republic," Emerging Markets Review, Elsevier, vol. 2(2), pages 138-160, June.
    20. Svejnar, Jan, 1999. "Labor markets in the transitional Central and East European economies," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 42, pages 2809-2857, Elsevier.

    More about this item

    Keywords

    Barter; Demonetization; Debt overhang;
    All these keywords.

    JEL classification:

    • P30 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:cesptp:hal-03595504. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CCSD (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.