CHRISTA HAINZ, Ludwig Maximilians University of Munich - Faculty of Economics, CESifo (Center for Economic Studies and Ifo Institute for Economic Research)
Email: christa.hainz@lrz.uni-muenchen.de
KIRA BOERNER, Seminar for Comparative Economics, Ludwig Maximilians University of Munich - Center for Economic Studies (CES)
Email: kira.boerner@lrz.uni-muenchen.de

In many developing and transition countries, we observe rather high levels of corruption. This is surprising from a political economy perspective, as the majority of people in a corrupt country suffer from high corruption levels. Our model is based on the fact that corrupt officials have to pay entry fees to get lucrative positions. In a probabilistic voting model, we show that a lack of financial institutions can lead to more corruption as more voters are part of the corrupt system and, more importantly, as the rents from corruption are distributed differently. Thus, the economic system has an effect on political outcomes. Well-functioning financial institutions, in turn, increase the political support for anti-corruption measures.

J. DAVID BROWN, Heriot-Watt University, Institute for the Study of Labor (IZA)
Email: j.d.brown@hw.ac.uk
JOHN S. EARLE, Upjohn Institute for Employment Research, Central European University - Department of Economics, Institute for the Study of Labor (IZA)
Email: earle@upjohn.org
SCOTT G. GEHLBACH, University of Wisconsin, Madison - Department of Political Science
Email: gehlbach@polisci.wisc.edu

Why have economic reforms aimed at reducing the role of the state been successful in some cases but not others? Are reform failures the consequence of leviathan states that hinder private economic activity, or of weak states unable to implement policies effectively and provide a supportive institutional environment? We explore these questions in a study of privatization in postcommunist Russia. Taking advantage of large regional variation in the size of public administrations, and employing a multilevel research design that controls for pre-privatization selection in the estimation of regional privatization effects, we examine the relationship between state bureaucracy and the impact of privatization on firm productivity. We find that privatization is more effective in regions with relatively large bureaucracies. Our analysis suggests that this effect is driven by the impact of bureaucracy on the post-privatization business environment, with better institutional support and less corruption when bureaucracies are large.

HRABRIN BACHEV, Institute of Agricultural Economics
Email: hbachev@yahoo.com

This paper presents lessons from environmental management in Bulgarian agriculture for Central Asian countries. Comparative institutional analysis is employed to evaluate potential of diverse governing modes to deal with environmental problems and risks, protect absolute and contracted eco-rights, stimulate eco-investment, intensify and coordinate eco-activities. Firstly, we assess efficiency of market, private and public modes in Bulgarian agriculture and identity major environmental challenges. Next we withdraw lessons how positive and negative experiences from Bulgarian transition could be used in modernization of environmental management in Central Asia. Post-communist transformation of Bulgarian agriculture has been associated with relaxation of general environmental pressure but also brought about significant new problems such as degradation and contamination of farmland, pollution of surface and ground waters, loss of biodiversity etc. Central Asian countries should adapt Bulgarian experience to their specific economic, institutional and natural environment. More particularly, they have to modernize institutional structure introducing new eco-rights, redistributing rights on natural resources, liberalizing eco-activities, and improving systems of enforcement of eco-rights. Next, they have to apply integral approach in governing of public support, research, education and extension programs embracing economic, social, environmental etc. aspects of agrarian sustainability. They also are to select more effective modes for public intervention (regulation, assistance, financing, partnership with private sector) and enhance direct public involvement is environmental preservation and improvement. Furthermore, different forms of public and international assistance should incorporate environmental measures in dominating modes of farming governance in each country; take into consideration all advantages, disadvantages and impacts of individual forms; commit to and effectively fund achievement of long-term goals; secure equal access of all type farms to support programs; and involve farmers and other stakeholders in program management and implementation.