Analysis of the Sustainability of the ‘Pomogaistvo’ Institution

• Main Author: Denis Vitalyevich Krylov
• Format: Article
• Language: Russian
• Published: Economic Research Institute of the Far East Branch of the Russian Academy of Sciences 2019-03-01
• Series: Prostranstvennaâ Èkonomika
• Subjects: institution; informal economy; technological changes; transaction costs; shuttle-trade; ‘pomogaiki’; ‘pomogaistvo’; Primorsky Krai; Russia; China
• Online Access: http://www.spatial-economics.com/images/spatial-econimics/2019_1/SE.2019.1.170-184.Krylov.pdf

This article discusses the phenomenon of the informal economy. The main emphasis is placed on the ‘pomogaistvo’ institution, which is typical for the border regions of Russia. The functioning of this institution is related to the possibility of duty-free importation of up to 50 kg of various goods, the total value of which does not exceed $1,500 (from January 1, 2019 the rate decreased to 25 kg and $500) in accordance with the customs code of the Eurasian Economic Union. This research is focused on the ‘pomogaistvo’ institution mainly taking place in the sector of the informal economy in Primorsky Krai. The main objectives of the research are: to find out why the ‘pomogaistvo’ institution stopped its work for a year and a half after the currency crisis of 2014, but later regained its activity and former influence; to study how the changing technologies affect the formalization / legalization of the institution of the informal economy. The research is based on qualitative data collected in the field using the following basic methods: in-depth interview and naturalistic observation. The article presents a description of the functioning of the ‘pomogaistvo’ institution, the processes taking place in it, a description of the roles of agents operating within this institution, and an assessment of the scale of this activity in the form of providing an approximate volume of goods imported into the Russian Federation from China. The analysis of the obtained empirical data is carried out on the basis of the positions of the North Douglas institutions concept, and more broadly, in the framework of the new institutional economic theory. As a result of processing the empirical data, it was concluded that institutional inertia and the introduction of electronic commerce technology into this institution were the main factors in the recovery of the ‘pomogaistvo’ institution. A contradiction was found between empirical data and a theory that the integration of technologies that reduce transaction costs in the institution of the informal economy does not lead to the formalization of this institution