Rackets, Regulation and the Rule of Law

44 Pages Posted: 26 Mar 2001

See all articles by Timothy Frye

Timothy Frye

Columbia University - Department of Political Science; National Research University Higher School of Economics

Ekaterina Zhuravskaya

Paris School of Economics (PSE)

Multiple version iconThere are 2 versions of this paper

Date Written: March 2001

Abstract

Governments that levy predatory regulation and provide few weak legal institutions draw businesses into the unofficial economy and compel them to hire private protection organizations. Based on a survey of shopkeepers in three cities in Russia, we find that retail shops face very high levels of predatory regulation and have frequent contacts with private protection rackets. In addition, we show that higher levels of regulation are associated with weaker legal institutions and a higher probability of contact with a private protection organization. We also find that shopkeepers view private protection organizations primarily as a substitute for state-provided police protection and state-provided courts. These results emphasize the importance of public sector reform as a component of economic transition.

Keywords: Government, racket, regulation, transition

JEL Classification: H39, K20, K42

Suggested Citation

Frye, Timothy and Zhuravskaya, Ekaterina, Rackets, Regulation and the Rule of Law (March 2001). CEPR Discussion Paper No. 2716. Available at SSRN: https://ssrn.com/abstract=264390

Timothy Frye (Contact Author)

Columbia University - Department of Political Science ( email )

MC3320
420 West 118th Street
New York, NY 10027
United States
212-854-3646 (Phone)

National Research University Higher School of Economics

Myasnitskaya street, 20
Moscow, Moscow 119017
Russia

Ekaterina Zhuravskaya

Paris School of Economics (PSE) ( email )

48 Boulevard Jourdan
Paris, 75014 75014
France

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