Preventing Predation: Oligarchs, Obfuscation, and Political Connections

60 Pages Posted: 11 Dec 2019 Last revised: 13 Dec 2019

See all articles by John S. Earle

John S. Earle

George Mason University - Schar School of Policy and Government; IZA Institute of Labor Economics

Scott Gehlbach

University of Chicago

Anton Shirikov

University of Wisconsin - Madison

Solomiya Shpak

George Mason University - School of Policy, Government, and International Affairs

Date Written: December 8, 2019

Abstract

We examine the decision of wealthy business owners to protect their holdings from expropriation and arbitrary taxation through proxies, shell companies, and offshore firms. Our theoretical framework emphasizes the role of political connections in decisions to obfuscate. Linking information from investigative journalists on Ukrainian oligarchs with firm-level administrative data on formal ownership ties, we observe obfuscation among more than two-thirds of oligarch-controlled firms, but such behavior is much less common for connected oligarchs. Further exploiting the abrupt shock to political connections that accompanied the Orange Revolution, we find a sharp rise in obfuscation among previously connected oligarchs.

Keywords: property rights, predation, oligarchs, ownership chains, political connections

JEL Classification: D23, G32, P26

Suggested Citation

Earle, John S. and Gehlbach, Scott and Shirikov, Anton and Shpak, Solomiya, Preventing Predation: Oligarchs, Obfuscation, and Political Connections (December 8, 2019). University of Chicago, Becker Friedman Institute for Economics Working Paper No. 2019-142. Available at SSRN: https://ssrn.com/abstract=3501060 or http://dx.doi.org/10.2139/ssrn.3501060

John S. Earle

George Mason University - Schar School of Policy and Government ( email )

3351 Fairfax Drive
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HOME PAGE: http://earle.gmu.edu

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Scott Gehlbach (Contact Author)

University of Chicago ( email )

1101 East 58th Street
Chicago, IL 60637
United States

Anton Shirikov

University of Wisconsin - Madison ( email )

716 Langdon Street
Madison, WI 53706-1481
United States

Solomiya Shpak

George Mason University - School of Policy, Government, and International Affairs ( email )

Founders Hall
3351 Fairfax Dr.
Arlington, VA 22201
United States

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