Article

 

Tolling arrangements in the russian industries : an institutional perspective (p.217-240)

by

Svetlana Avdasheva, Institute for Industrial and Market Studies, State University – Higher School of Economics (Moscow, Russia)

Keywords : tolling contracts, transition, Russian industries, disorganization, restructuring, ownership rights, vertical integration

JEL classification : L22, L42, M130, P31

Abstract

This paper presents an overview of a specific type of arrangement for input supply widely applied in the Russian and Ukrainian industries. Over the last five years the arrangement, known as tolling contract, has been accounting for a large and stable share of the total volume of several homogenous industrial outputs. I will hereby examine the contract as a way of reallocation, in the short-run, of property rights to enterprises having refining capacities. Tolling can also be considered as a tool of vertical integration. It enables the supplier of input to neutralize “double marginalization” in a vertical chain and therefore increases both the profit of supplier and social welfare. Usage of tolling does not provide a “vertical profit” in the sense of Mathewson and Winter, however, control over input supply helps a new company to reduce sunk costs, making the acquisition of refining capacities unnecessary. Evidence from the Russian food-processing industry supports the view that tolling is a mean of entering the market by new firms, and at the same time of restructuring refining enterprises.