Hard to Bear, Hard to Measure: the Costs of Small Business Legalization in Ukraine

Abstract

This study applies the concept of Costs of Exchange to the measurement of the costs of obtaining legal permission to open a small garment firm in Ukraine. The objective is to better understand the prices individuals actually face in Ukraine. The business legalization in Ukraine includes both the state registration and getting of local permits from local authorities. State registration is clearly defined and transparent with low levels of corruption. Unlike the state registration, the complex local permit system is non-transparent and conducive to corruption. The survey data show the opportunity costs of getting permits vary significantly across different owners.