Arrears: The Tide that is Drowning Russia

Ivanova, Nadezhda; Wyplosz, Charles

doi:10.1111/1467-9426.00033

Cited by 23 publications

(2 citation statements)

References 2 publications

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“…In a situation of pervasive arrears growth, arrears are effectively legalised, weakening the contract enforcement institution, which reduces arrears-related costs and makes non-compliance a rational behaviour strategy. Hence the use of offsets, although it accelerates the convergence of arrears build-up in the economy, may encourage emergence of new arrears (Ivanova and Wyplosz (1999)), which are most probably opportunistic.…”

Section: Role Of Offsets and Barter In An Arrears-ridden Economymentioning

confidence: 99%

Arrears in a Transition Economy: the Mechanism of Contagion

Lugovoy

2002

Russian Economic Trends

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The arrears issue has long been one of the gravest unresolved problems in the Russian economy. With stabilisation of public finances and the onset of economic growth in recent years, the severity of this problem has markedly decreased, but it is too early to claim that it has been completely resolved. This paper analyses macroeconomic aspects of arrears in terms of the hypothesis that arrears are a way of providing hidden subsidies to inefficient production companies. The results of the study point to such negative effects of arrears on the economy as decline in consumption, decrease in demand for real cash balances, encouragement of barter and offsets, veiling of the initial sources of arrears, and distortion of normal market responses to the debtor's financial problems. The latter is connected to the fact that problems of insolvent firms and entire sectors in the conditions of a system of non-payments are not confined to specific economic agents but are multiplied and spread throughout the economy, creating financial problems for other firms and sectors as well.As some sectors of the economy do not accept delays in payment for delivered products, generation of overdue payables in one sector may result in demand constraints and consumption decline in other sectors. In an environment where wage arrears are tolerated, households automatically become a creditor of insolvent sectors, reducing their own consumption.Offsets do not have any effect on the established system of hidden subsidies, as they decrease accumulated arrears only in the short term. As to barter, it can be viewed as a system of compulsory consumption of goods manufactured by domestic producers. THE MAIN CAUSES OF NON-PAYMENTSPayment arrears are not an exclusive feature of developing and transition economies. A certain level of unpaid liabilities normally exists in any market economy. However, developed economic systems have institutional mechanisms of settlement (contract enforcement), which prevent the problem from assuming major proportions. Such types of overdue payables as tax and wage arrears are rare in developed market systems. The problem is also less severe in some transition economies, such as Poland, the Czech Republic and Slovakia.In our earlier research (Entov, Lederman, Lugovoy and Zolotareva (2001)) three types of microeconomic models were identified, 1 describing causes of generation of net arrears.The first model, called 'intentional arrears', examines the motives for intentional increase of overdue payables. Such opportunistic behaviour may be widespread in a situation of inefficient market institutions and a weak contract enforcement system.The second model assumes that accrual of overdue liabilities is at least partially involuntary but a firm could cope with the problem by taking a short-term loan. However, one of the most important assumptions of the second model is that firms under consideration do not sustain systematic losses. In other words, the second model, based on the assumption of short-term cash shortage (closely rel...

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Section: Role Of Offsets and Barter In An Arrears-ridden Economymentioning

confidence: 99%

Arrears in a Transition Economy: the Mechanism of Contagion

Lugovoy

2002

Russian Economic Trends

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“…Arrears are sometimes seen as the users who act of outstanding fees, and happen frequently in electricity, heat and water, telecom, education, culture, housing, etc [1] . As a common phenomenon in transition countries, the payment arrears issue has long been one of the gravest unresolved problems in china.…”

Section: Introductionmentioning

confidence: 99%

Arrears: A Hawk-Dove game theory between public service enterprises and users

2010

2010 International Conference on Logistics Systems and Intelligent Management (ICLSIM)

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The arrears issue in public service enterprises becomes the current focus of attention of our society. This paper proposed unreasonable regulatory mechanism is one of the most important causes of arrears. A Hawk-Dove game theory is applied here in order to produce a comprehensive analytic framework for solving such problem. Based on this theory, the paper analyzes the ESS for public service enterprises and users will be live and let-live. Several commendations for incentive compatibility are given accordingly: on one hand, call attention to the users frequently; on the other hand, install new anti-arrears equipments to make a record of the users and punish intentional arrears.

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