Foreign Direct Investment and Governance Quality in Russia

This paper studies the effect of poor governance quality on foreign direct investment in Russia. Using a survey of businesses across forty administrative districts, we find that higher frequency of using illegal payments and higher pressure from regulatory agencies, enforcement authorities, and criminals, negatively affect foreign direct investment. Our identification strategy builds on the exogenous cross-regional variation in worker strikes during 1895-1914, the period before the October Revolution. We find that moving from the average to the top governance quality across Russian regions more than doubles the FDI stock.

Keywords: foreign direct investment, quality of governance, corruption, Russia

JEL Classification: F21, G15, O17

Suggested Citation: Suggested Citation

Kuzmina, Olga and Volchkova, Natalya and Zueva, Tatiana, Foreign Direct Investment and Governance Quality in Russia (April 30, 2014). Available at SSRN: https://ssrn.com/abstract=2432967 or http://dx.doi.org/10.2139/ssrn.2432967