Barter in the US economy: a macroeconomic analysis

In this paper, a statistical model is developed to examine the determinants of the growing level of barter transactions in the US. Although a barter system is believed to be Pareto inferior to a money system, recent statistics of the estimated level of barter transactions in the US show a rapidly growing interest by large corporations as well as individuals in this type of trade. The primary obstacle in empirical research in this area is the difficulty of measuring the size of barter transactions. Here, data from barter exchange organizations are used to test the significance of several variables. The Ordinary Least Squares, and Cointegration and Error Correction Models are employed as two alternative empirical techniques to analyse the data. The results support the counter-cyclical arguments as well as the inflation factor. However, the notion of tax evasion as a motive in organized barter receives only a partial support.