Therefore, they do not necessarily indicate absolute growth in the number of barter transactions. There may also be a selection bias, if firms that engaged in barter before the reform period were the most likely to survive. Analysis to Date Economists studying barter and managers participating in it have suggested a variety of explanations for the prominence of barter in Russia. Faced with the breakdown of central planning, enterprises have clung to pre-existing barter arrangements. Barter trade, although officially taxed, makes transactions less transparent.
Enterprises are better able to conceal both transactions and profits.
When enterprises are unable to get bank loans for working capital, they get trade credit from suppliers. These suppliers, in turn, ask for payment in goods, either to get a more secure claim or to get a higher price. In the absence of effective corporate governance, less transparent transactions make the diversion of funds easier. Barter prices tend to be higher than cash prices, allowing an enterprise to appear viable and to indicate compliance with accounting rules that prohibit selling goods below cost. Tax avoidance is a much less important motivator.