Stability in norwegian-russian trade : the case of institutional incompatibility

• Main Author: Fjærtoft, Daniel Buikema
• Format: Dissertation
• Language: Norwegian

What are the consequences of conducting trade with transitional Russia? This paper takes a look at possible consequences for trade when trade contracts cannot be fully enforced across international borders. It investigates the possibility of improved stability in trade by taking into account the incentive constraints of importers as well as exporters. The paper looks into stability determinants in Norwegian data on exports of fish to Russia in the years 1996-2004. The goal of this paper is to investigate the consequences for bilateral trade of the difference in institutional design between Russia and Norway. There is no doubt that the economic institutions of Norway and Russia are dissimilar in many ways. Some times one can discover that an institution typical of the one country lacks a counterpart in the other country - defined property rights to real estate is one example. In international trade an individual or a firm from one country that wishes to do trade in another country must learn the ”rules of the game” in the country he wishes to do business. For the case of Norway and Russia, a Norwegian firm will have to learn to use such institutions as the Russian judicial system to enforce contracts. In some circumstances the Norwegian firm will discover that the Russian counterpart of a Norwegian economic institution such as property rights enforcement is not taken care of by the same authority as in Norway. Such a learning process is bound to take time. Until two counties have an extensive history of bilateral trade one cannot expect firms from one country to benefit from the institutions of the foreign country to the same degree as firms who are from this foreign country and to whom these institutions are familiar. When one or both sides in international trade experience higher transaction costs than they would conducting domestic trade because their market institutions differ from the institutions of their partner - I choose to speak of institutional incompatibility. The concept of institutional incompatibility is interesting in connection with Norwegian-Russian trade. Institutional barriers to entry are high on the agenda of firms with interests in Russia, but there has been done little research in this field. For example 66,2 % of the respondents in the Norwegian Confederation of Enterprise’s survey found activity related to the Russian market ”hard, but not impossible”. Furthermore the most significant barriers to working in Russia after government