Institutional Subversion: Evidence from Russian Regions

42 Pages Posted: 8 Oct 2003

See all articles by Irina Slinko

Irina Slinko

Swedbank, Group Risk Control

Evgeny Yakovlev

Center for Economic and Financial Research (CEFIR)

Ekaterina Zhuravskaya

Paris School of Economics (PSE)

Date Written: August 2003

Abstract

What are the effects of institutional subversion on small business development, fiscal policies, economic growth, and firm performance? This Paper provides an empirical investigation of institutional subversion in Russia's regions. We develop a complete account of preferential treatments to the largest regional firms in texts of regional legislation during 1992-2000. The concentration of preferential treatments is used as a proxy for legislative subversion. Based on cross-section and panel data analysis, we find that regional institutional subversion has an adverse effect on small business growth, tax collection, social public spending, and federal tax arrears. Robustness of these results is verified by looking at a proxy for potential subversion based on size concentration in regional economies. The alternative approach produces similar results. Regional political influence generates substantial gains to firms both in the long and the short run. These firms exhibit faster growth in sales, market share, profitability, employment, and capital compared to their counterparts who are not politically connected. Yet, firms that exercise political influence have lower labour productivity.

Keywords: Institutional subversion, capture, Russia, reforms

Keywords: Institutional subversion, capture, Russia, reforms

JEL Classification: D71, D72, P26, P27

Suggested Citation

Slinko, Irina and Yakovlev, Evgeny and Zhuravskaya, Ekaterina, Institutional Subversion: Evidence from Russian Regions (August 2003). CEPR Discussion Paper No. 4024. Available at SSRN: https://ssrn.com/abstract=456581

Irina Slinko

Swedbank, Group Risk Control ( email )

SE-105 34 Stockholm
Sweden

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)

Ekaterina Zhuravskaya (Contact Author)

Paris School of Economics (PSE) ( email )

48 Boulevard Jourdan
Paris, 75014 75014
France

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