The Unequal Enforcement of Liberalization: Evidence from Russia's Reform of Business Regulation

Abstract

We document unequal enforcement of liberalization reform of business regulation across Russian regions with different governance institutions which lead to unequal effects of liberalization. The enforcement of national liberalization laws was better in subnational regions with more transparent government, better informed population, closer monitoring by powerful industrial lobbies, and stronger fiscal autonomy. As a result, in better regions in terms of governance institutions, liberalization had a substantial positive effect on performance of small firms and growth of official small business sector. In contrast, in worse regions, we observe no effect of reform and, in some cases, even a negative effect.

Keywords: Regulation, deregulation reform, business entry

JEL Classification: H10, K20, L50