Diminishing Returns to Administrative Controls and the Emergence of the Unofficial Economy: A Framework of Analysis and Applications to Ukraine
构建行政控制强度指数，发现乌克兰至1994年夏经济自由化程度极低，并指出行政控制过度会导致经济活动转入地下经济，形成倒U型关系。
Economic liberalization Daniel Kaufmann This paper (written in May, 1994) presents a fresh perspective on underemphasized issues of liberalization in the Ukraine. The paper constructs an index of the intensity of administrative controls, and concludes that by the Summer of 1994 the Ukrainian economy was only minimally liberalized. This level of liberalization was almost the same as at the time of independence in late 1991. In addition to the prevalence of vested interests and economic ‘myths’, I attribute the persistence and proliferation in central administrative controls over the economy to the inconsistency between fiscal and monetary policies. The need for fiscal restraint has not been understood by policy-makers, and monetary stringency that is inconsistent with budgetary laxity is not sustainable beyond a few months. By default, administrative controls are used as macroeconomic remedies. I hypothesize that beyond a certain point, as the intensity of administrative controls over the official economy continues to increase, the actual administrative control of the state over the overall economy declines in reality. This ‘inverted-U shape’ relationship comes from agents shifting their economic transactions from the official economy to the underground economy as direct controls are increasingly placed on the former. The initiation of a bold programme of economic liberalization is the key to stopping the movement out of the official economy and regaining the confidence of the unofficial economy. Market liberalization must be implemented in order for the macroeconomic stabilization, privatization and social protection programmes to succeed. It will reduce the demands for budget subsidies and soft credits, and restore growth to the economy. Such principles have been grasped by the Kuchma administration that came to power in August 1994. A comprehensive reform programme, including liberalization of foreign trade, foreign exchange and prices has been initiated.