Institutional Reform in Transition: A Case Study of Russia

Abstract

A decade of experience with the transition from centrally planned to market economies has taught us that the strength of a country's market-supporting "institutions" powerfully affect transition success. However, the necessary institutions are rarely specified in detail. This Article is an early installment on a larger project that begins the task of providing this missing detail through a case study of Russia. We describe the multiple legal, institutional, and microeconomic reforms that Russia needed to put in place as part of its transition to a market economy. We discuss the important and sometimes nonobvious synergies between different reform elements, and explain why these synergies make controlling corruption a core element of successful transition, which Russia long neglected. Our basic message is to stress the complexity of reform, the interrelatedness of reform elements, and the pervasive effect of corruption in undermining reform effort, and the potential for (mostly) self-enforcing laws to limit bureaucracy and corruption.