Roving Bandits in Action: Outside Option and Governmental Predation in Autocracies

35 Pages Posted: 17 May 2012  

Alexander Libman

Ludwig Maximilians University of Munich

Vladimir Kozlov

National Research University Higher School of Economics

André Schultz

Frankfurt School of Finance & Management gemeinnützige GmbH

Date Written: May 16, 2012

Abstract

The paper investigates the influence of outside options on the predatory behavior of autocrats. An outside option is referred to as the opportunity of an incumbent ruler to continue his career outside his current territory of control. The paper uses data on the effectiveness of tax collection and the repressiveness of tax jurisprudence for Russian regions in 2007-2009 and finds that regions ruled by governors with substantial outside options are characterized by more repressive behavior of tax authorities. However, surprisingly, the same tax authorities collect less additional revenues for the public budget. It conjectures that the presence of an outside option induces autocrats to behave like ‘roving bandits’: they use tax audits to establish control over regional companies, but exploit this control to extract private rents rather than revenues for the regional budget used for public goods provision.

Keywords: roving and stationary bandit, tax auditing, predatory government, Russian federalism

JEL Classification: D72, D73, H77, P26

Suggested Citation

Libman, Alexander and Kozlov, Vladimir and Schultz, André, Roving Bandits in Action: Outside Option and Governmental Predation in Autocracies (May 16, 2012). Available at SSRN: https://ssrn.com/abstract=2060846 or http://dx.doi.org/10.2139/ssrn.2060846

Alexander Libman (Contact Author)

Ludwig Maximilians University of Munich ( email )

Munich, D-80801
Germany

Vladimir Kozlov

National Research University Higher School of Economics ( email )

Myasnitskaya street, 20
Moscow, Moscow 119017
Russia

André Schultz

Frankfurt School of Finance & Management gemeinnützige GmbH ( email )

Sonnemannstraße 9-11
Frankfurt am Main, 60314
Germany

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