Your browser does not support the PubReader view.
Go to this page to see a list of supporting browsers.
Seoul Journal of Economics
[ Article ]
Seoul Journal of Economics - Vol. 21, No. 2, pp.387-425
ISSN: 1225-0279 (Print)
Print publication date 31 May 2008
Received 08 Jan 2008 Revised 22 Jun 2008

Informal Economic Activities and Firm Performance in a Transition Economy: The Case of the Cashmere Industry in Mongolia

Nyamaa Nyamsuren ; Keun Lee
Professor, School of Economics and Business, Mongolian State University of Agriculture, Zaisan-53, Ulaanbaatar, Mongolia, Tel: +976-99009072, Fax: +976-11-344944 nyamaa_n@yahoo.com
Professor, Department of Economics, Seoul National University, Seoul 151-746, Korea, Tel: +82-2-880-6367 kenneth@snu.ac.kr

JEL Classification: D21, D23, P31

Abstract

The cashmere industry is one of the most important foreign currency generators as well as the major income contributor in Mongolia. This study first finds a tendency that cashmere enterprises in Mongolia engage in the trading of raw cashmere rather than use raw cashmere in the production process given the shortage of raw cashmere, its high prices, and the low competitiveness of the final products (garments). This work also finds that there is a high extent of smuggling by enterprise people in the form of selling raw cashmere in black markets, and that a higher degree of smuggling leads to less output, sales. The results suggest the serious damages brought about by smuggling activities in Mongolia. This is in sharp contrast to the impact of formal trading because this does not harm firm profitability and sales growth although it affects production negatively. Finally, income tax rates have a negative and significant impact on profitability and no significant impact on output.

Keywords:

Mongolian economy, Economic reform, Cashmere industry, Cashmere production, Cashmere export, Government policy

References

  • Cao, X. The Role That the Industry Organization Plays in Strengthening International Cooperation and Promoting the Healthy and Sustainable Development of the Cashmere Industry. China, 2005.
  • Chidmedtseren, S. Monitoring Report on Cashmere Enterprises. Ministry of Industry and Commerce, 2001.
  • Evans, D. S. “Tests of Alternative Theories of Firm Growth.” Journal of Political Economy 95 (No. 4 1987a): 657-74. [https://doi.org/10.1086/261480]
  • Evans, D. S. “The Relationship between Firm Growth, Size and Age: Estimates for 100 Manufacturing Industries.” Journal of Industrial Economics 35 (No. 4 1987b): 567-81. [https://doi.org/10.2307/2098588]
  • Filmer, R. J. The Mongolian Cashmere Industry. The World Bank, 2002.
  • Mongolian Parliament. The Foreign Investment Law. 1991.
  • Johnson, S., and Kaufmann, D. “The Unofficial Economy in Transition.” Brookings Paper on Economic Activity 28 (No. 2 1997): 159-239. [https://doi.org/10.2307/2534688]
  • Jovanovic, B. “Selection and Evolution of Industry.” Econometrica 50 (No. 3 1982): 649-70. [https://doi.org/10.2307/1912606]
  • Songwe, V. From Goat to Cashmere. The World Bank, 2003.
  • Sutton, J. “Gibrat’s Legacy.” Journal of Economic Literature 35 (No. 1 1997): 40-59.
  • Zhang, Anming., Zhang, Yimin., and Zhao, Ronald. “Profitability and productivity of Chinese industrial implications.” China Economic Review 13 (No. 1 2002): 65-88. [https://doi.org/10.1016/S1043-951X(01)00060-8]

Web Sites

  • http://www.adb.mn
  • http://www.carinsgruop.org/proposals/index.html
  • http://www.gschneider.com/marketinindexes/index.html
  • http://www.gobi.mn
  • http://www.mongolchamber.mn
  • http://www.mofa/gov/mn
  • http://www.moti/gov/mn
  • http://www.nso.mn
  • http://www.tcimongolia.org
  • http://www.undp.mn