IIMS seminar series "Institutional Problems of the Russian Economy"

On May 11, Denis Ivanov spoke at the second seminar in the newly relaunched series.

Denis Ivanov (Senior Research Fellow, ICSID HSE) presented the paper "Market under the radar: Soviet shadow economy and post-Soviet preferences in Georgia", co-authored with Anton Aisin. The paper was a compelling exploration of a topic that is often overlooked. His research shed light on the ways in which the Soviet economy operated outside of official channels and how this has influenced economic preferences in Georgia today. 

Maria Kravtsova's (Research Fellow, LCSR HSE) discussion was equally insightful, providing a nuanced analysis of the paper's strengths and weaknesses. Overall, this was a unique contribution to our understanding of the complexities of economic systems in post-Soviet countries. It is clear that further research is needed to fully understand the impact of shadow economies on contemporary economic preferences, but Ivanov and Aisin have made an important first step in this direction. 

Abstract. We study the long-run effect of the Soviet shadow economy on attitudes toward the market economy and competition in Georgia – a former Soviet republic known for the high prevalence of the shadow economy. We use the density of Soviet-era organized crime as a proxy for the local prevalence of shadow economy and instrument it with agroclimatic suitability for citrus fruits, exploiting the fact that citrus and other subtropical agricultural products were an object of shortage and illicit trade during the Soviet era. We show that the citrus-suitable parts of Georgia have a higher density of Soviet-era thieves in law and that survey respondents living in these areas are more likely to report lower preference towards state ownership of businesses and higher appreciation of competition. Higher social legitimacy of private entrepreneurship is likely to be behind these findings: employed respondents in citrus-producing areas rate fairness of their compensation higher than in the rest of Georgia when they have their own business and lower – when they work in the public sector.