Laws for Sale: An Empirical Study of the Effects of Regulatory Capture

CEFIR Discussion Paper

39 Pages Posted: 28 Jul 2003

See all articles by Irina Slinko

Irina Slinko

Swedbank, Group Risk Control

Ekaterina Zhuravskaya

Paris School of Economics (PSE)

Evgeny Yakovlev

Center for Economic and Financial Research (CEFIR)

Date Written: March 2004

Abstract

What are the effects of capture of legislature and regulations by few politically powerful firms on growth and redistribution? We build direct measures of regulatory capture and firms' political power based on a unique micro-level dataset on preferential treatment of selected firms by Russian regional legislature and regulatory agencies during 1992-2000. The findings are: 1) political power generates substantial performance gains to firms both in the long and the short run; 2) capture hurts firms that have no political power: their performance decreases with an increase in the level of capture; 3) at the regional level, capture negatively affects small business growth, tax capacity of the state, and the share of social public expenditure; 4) there is no evidence that regulatory capture has had a significant impact on aggregate growth. We distinguish between two possible determinants of preferential treatments - special interest politics and social redistribution and show that the former is empirically more relevant.

Keywords: Regulatory capture, institutional subversion, Russia, redistribution, special-interest politics

JEL Classification: P26, P27, D71, D72

Suggested Citation

Slinko, Irina and Zhuravskaya, Ekaterina and Yakovlev, Evgeny, Laws for Sale: An Empirical Study of the Effects of Regulatory Capture (March 2004). CEFIR Discussion Paper. Available at SSRN: https://ssrn.com/abstract=402840 or http://dx.doi.org/10.2139/ssrn.402840

Irina Slinko (Contact Author)

Swedbank, Group Risk Control ( email )

SE-105 34 Stockholm
Sweden

Ekaterina Zhuravskaya

Paris School of Economics (PSE) ( email )

48 Boulevard Jourdan
Paris, 75014 75014
France

Evgeny Yakovlev

Center for Economic and Financial Research (CEFIR) ( email )

47 Nakhimovsky Prospect, Office #720
117418 Moscow
Russia
+7 095 3105 5002 (Phone)
+7 095 3105 5003 (Fax)

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