An Accounting Model of the Virtual Economy in Russia

Two noted American specialists on the Russian economy outline the concept of the “virtual” economy and present a simple model explaining its operation. The model makes it possible to trace the movement of value through the economy from points where it is created (resource-producing enterprises) to sites where it is lost (manufacturing) and identifies mechanisms whereby such losses are concealed and accommodated through barter, arrears, offsets, and delayed wage payments. The authors devote particular attention to motivations underlying participation of major actors in the virtual economy and examine why programs to combat corruption and improve tax collection could be compromised. Journal of Economic Literature, Classification Numbers: C50, H30, O52, P51. 1 figure, 3 tables, 14 references.