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

37 Pages Posted: 20 Oct 2012

See all articles by Alexander Libman

Alexander Libman

Frankfurt School of Finance and Management

Vladimir Kozlov

National Research University Higher School of Economics

André Schultz

Frankfurt School of Finance & Management

Date Written: November 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.

Suggested Citation

Libman, Alexander and Kozlov, Vladimir and Schultz, André, Roving Bandits in Action: Outside Option and Governmental Predation in Autocracies (November 2012). Kyklos, Vol. 65, Issue 4, pp. 526-562, 2012, Available at SSRN: https://ssrn.com/abstract=2164569 or http://dx.doi.org/10.1111/kykl.12005

Alexander Libman

Frankfurt School of Finance and Management ( email )

Adickesallee 32-34
Frankfurt, 60322
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 ( email )

Adickesallee 32-34
Frankfurt am Main, 60322
Germany

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