Informality, illegality, and alternative systems of regulation of economic activity in contested states

This paper examines Abkhaz and South Ossetian (contested) authorities’ stakes in processes of informality, illegality, regulation, and criminalization of a variety of economic activities. Focusing on the period between the early 1990s and 2008, it shows how contested states exploit legal voids that emerge as a consequence of disputed sovereignties to ensure their viability. By establishing alternative systems of formality and legality, and by integrating and legitimizing informal practices, they contribute to economic resilience in areas with diminishing and limited economic opportunity. The paper argues that this double process of boosting viability and establishing alternative mechanisms of regulating economic activities contributes to the consolidation of internal legitimacy and boost support for de facto independence.