When Does Business Turn Violent?
51 Pages Posted: 17 Jul 2012 Last revised: 7 Aug 2012
Date Written: 2012
Abstract
A conventional wisdom shared by many policy-makers, academics, and the general public holds that the collapse of the Soviet Union led to a decade-long “wild capitalism” in many countries of the Former Soviet Union. In this model, a virtual absence of the central state situated the economic sphere of these territories under the conditions of anarchy, and frequent outbreaks of violence between various groups signified periods of its breakdown. Many believe that in Russia, this period ended in 2000, when the central state regained its bearings and started “putting things in order.” It is interesting that neither part of this conventional wisdom was ever subjected to thorough empirical testing. Yet, the importance of understanding when and why economic agents resort to the use of force in their activities can hardly be overestimated because the consolidation of a mature market economy is only possible if these agents agree to abstain from arbitrary use of violence in competition for markets, defense of property rights, and enforcement of contracts. Another way to phrase this question is to ask under what conditions business turns violent? This paper aims to test one hypothesis, namely, the impact of government turnover on the intensity of business-related violence. Government turnover can induce violence through various channels including possible expropriation and reassignment of property rights, formation of coalitions unfavorable for certain organized interests, as well as temporarily impaired efficiency of law enforcement.
Keywords: business, violence, weak institutions, property rights
JEL Classification: D74, F52, H11, K42
Suggested Citation: Suggested Citation