Working Papers and Publications

Publications

Substituting Distribution for Growth: The Political Logic of Intergovernmental Transfers in the Russian Federation.
with Eugenia Nazrullaeva (UCLA) and Andrei Yakovlev (NRU-HSE)
Economics & Politics 28 (1), 23-54

Given limited resources and economic realities, how do politicians distribute monetary transfers in order to retain office? Previous work has largely focused on two models – a core model of rewarding loyal supporters and a swing model of purchasing the support of easily swayed voters. Empirical results have proven mixed, however. In this article, we argue that these mixed results are due to economic factors, which condition politicians’ distributive strategies. In our model, we consider that politician and voters are involved in a repeated game, where past expectations condition future strategy. Current (core) supporters who receive few benefits and perceive themselves worse off than other, less loyal, groups are likely to be less loyal themselves tomorrow. In our model, politicians avoid this by providing their supporters consumption benefits directly, in the form of transfers, or indirectly, via strong economic growth. Where economic growth is good, politicians can distribute less to core supporters, who benefit from the rising economy. Where economic growth is weak, however, politicians make transfers to their core supporters to ensure future loyalty. We test our theory using data on federal transfers from the Russian Federal government to 78 Russian Regions from 2000–2008.

Previous version: Higher School of Economics Research Paper No. WP BRP 12
Article
Supplementary Appendix
Replication Materials

The Political Roots of Intermediated Lobbying: Evidence from Russian Enterprises and Business Associations
with Andrei Govorun (NRU-HSE) and William Pyle (Middlebury)
Business and Politics 18 (4), 395-433

A business enterprise interested in influencing the design, adoption or enforcement of a particular law, rule or regulation often confronts a choice. Does it lobby officials directly? Or does it do so indirectly, using a collective action group as an intermediary? We draw on data from a large, 2010 survey of enterprises across the Russian Federation to demonstrate that the propensity to engage in intermediated lobbying increases with region-level political competition. Our explanation builds on recent evidence confirming Mancur Olson’s claim (1982) that less encompassing actors tend to lobby for more distortionary policies. We hypothesize that with greater political competition government officials become more responsive to encompassing voices (i.e., associations of businesses as opposed to single firms), since the electoral costs of being captured by narrower interests becomes greater. Evidence from a complementary survey of regional business association managers points in the same direction; the relative attention paid by officials to lobbying efforts by encompassing associations increases with political competition.

Previous Version: Higher School of Economics Research Paper No. WP BRP 46/EC/2013
Article

The Reform of Skill Formation in Russia: Regional Responses
with Thomas F. Remington (Emory University)
Europe-Asia Studies,
Forthcoming

How do employers and governments in transitional economies cooperate to overcome institutional obstacles to skill formation? Existing literature in the VOC tradition distinguishes between coordinated market and liberal market economy approaches. So far, however, little research has addressed this problem in the context of emerging market economies, where the institutional preconditions for developed market economies may be lacking. This paper uses the case of Russia to address the ways in which emerging market economies can reform systems of vocational education and training. Following a discussion of the history of skill formation in Russia from the Soviet era through the present, we present four case studies of Russian regions that have successfully undertaken reform of VET.

Previous Version: Higher School of Economics Research Paper No. WP BRP 19
Article

Under Review

Firms and Social Policy in the Post-Communist Bloc: Evidence from Russia

When does business support the expansion of social policy in the developing world? Existing work on managers preferences has tended to concentrate on the developed world, where governments can credibly commit to policy, tax evasion is constrained, and mechanisms exist to hold the bureaucracy accountable for policy implementation. In this paper, I relax these assumptions, arguing that weak institutions create opportunities for some firms to shift costs onto others: making social policy more attractive. I argue that firms with political connections are uniquely positioned to benefit from subsidies and property rights protection, which decreases the cost of social policy, while firms with low visibility can evade taxes and free-ride off universalistic social policy. I test this argument using a survey of 666 firms in 10 Russian regions.

Previous Version: Higher School of Economics Research Paper No. WP BRP 87
Article

Firms and Social Policy in the Post-Communist Bloc: Evidence from Russia

When does business support the expansion of social policy in the developing world? Existing work on managers preferences has tended to concentrate on the developed world, where governments can credibly commit to policy, tax evasion is constrained, and mechanisms exist to hold the bureaucracy accountable for policy implementation. In this paper, I relax these assumptions, arguing that weak institutions create opportunities for some firms to shift costs onto others: making social policy more attractive. I argue that firms with political connections are uniquely positioned to benefit from subsidies and property rights protection, which decreases the cost of social policy, while firms with low visibility can evade taxes and free-ride off universalistic social policy. I test this argument using a survey of 666 firms in 10 Russian regions.

Previous Version: Higher School of Economics Research Paper No. WP BRP 87
BOFIT Discussion Paper 7 2018

Calling the Cavalry: Firm-level Investment in the Face of Decentralized Expropriation
with Anton Kazun (NRU-HSE), Irina Levina (NRU-HSE), and Andrei Yakovlev (NRU-HSE)

What characteristics of firms give them the confidence to invest in settings rife with expropriation by local officials? Empirically, firms often face the threat of expropriation from local agents of the state rather than a centralized autocrat. Because policing local officials is costly, it is difficult for the state to credibly commit to doing so with negative consequences for investment. We argue that one solution to decentralized expropriation is to allow firms to approach the state directly to ask for intervention. Not all firms are equally able to successfully get the attention of the state, however, so this mechanism only works for a subset of firms. We develop an argument about the firm-level characteristics – large-scale employment, political connections, foreign ownership, and business association membership – that should make the central state more attentive to calls for help. Because such firms are more likely to secure intervention against predatory bureaucrats, the latter are less likely to try to expropriate them. These firms’ investment decisions should be less sensitive to local expropriation than other firms. We test this argument using data on cases of decentralized expropriation across Russia’s regions and firm-level data from a cross-regional, large scale survey of Russian firms.

Encouraging Skill Development: Evidence from Public-Private Partnerships in Education in Russia’s Regions
with Thomas F. Remington (Emory University) and Vladimir Bazavliuk (NRU – HSE)

How and when are governments able to encourage firms and schools to work together to develop workers’ skills? Upgrading the quality of human capital in the workforce is widely seen as a key challenge faced by countries looking to escape the “middle income trap”. Growing attention has been paid to public-private partnerships (PPP) between individual firms and schools as a powerful tool for meeting this challenge, but key facilitators of PPP thought crucial in existing studies – strong, independent employers’ associations and labor unions – are often missing in such settings. To explore the emergence of PPP in skill development in the developing world, we draw on recent reform experiences in Russia’s regions that have led to a surge in complex, costly forms of PPP despite historically anemic business associations and unions. We argue that variation in the administrative capacity of regional governments and their political accountability explains this surge. Strong administrative capacity reassures all parties that regional authorities can monitor their counterparties’ compliance with agreements, while political accountability creates incentives for authorities to do so. We test our argument using original data on the existence and content of firm-school partnerships across all Russia’s regions for 2013.

Working Papers

Institutional Quality and Social Policy Preferences: Experimental & Survey Evidence
with Sarah Wilson-Sokhey (University of Colorado, Boulder) and Joseph B. Schaffer (University of Colorado, Boulder)

Using laboratory experiments conducted in two countries, we examine how poor institutions influence individuals support for redistribution. Contrary to conventional expectations, we argue that high-earning individuals will prefer more redistribution when they can more easily evade taxes. To test our expectations, we conducted a series of experiments from February to May 2016 simulating earned income and tax evasion. We find that high earners do indeed prefer more redistribution when they can more easily under-report their income. Our findings make an important contribution to the little studied question of how institutional quality affects social policy preferences.

Uncertainty as a Factor in Investment Decisions: The Case of the Russian Federation’s Regions
with Irina Levina (NRU – HSE), Andrei Yakovlev (NRU – HSE), and Gregory Kisunko (World Bank)

This paper argues that although the bulk of the literature tends to focus on regulatory uncertainty stemming from formal practices, uncertainty that comes from unpredictable informal practices surrounding regulation is an underexplored additional form of regulatory uncertainty. The paper uses the results of empirical analysis of several unique firm-level data sets to argue that firms in Russian institutional environments adapt to informal practices of business-government interactions, so long as these practices are predictable. The paper draws a distinction between differences in levels of relatively well-ordered (and often centralized) and therefore predictable corruption—a predictable component of the cost of doing business—and variation in experiences with corruption, which often results from decentralized, unconstrained (“administrative”) corruption and the rent-seeking incentives of lower level officials. It argues that a significant obstacle to investment decisions at the regional level is not so much formal or informal rules per se, but lack of predictability of their application. It also examines in-country inconsistency in property rights enforcement as another source of underexplored regulatory uncertainty tied to informal practice. Unlike administrative corruption, inconsistent property rights enforcement is a fundamental, existential threat to businesses. To test this hypothesis, the paper draws on a measure that captures private “raiders'” attacks on firms—hostile, often violent takeovers of firms by outsiders aided and often abetted by law enforcement agencies. The paper argues that the greater is the number of raider attacks for a given region, the greater is the uncertainty and the less likely is investment.

Policy Research Working Paper. WPS. World Bank , 2016. No. 7806
Article Page

Institutional Quality and Individual Preferences for Social Policy

Who supports social policy in settings where institutions are weak? Existing work on social policy preferences focuses on the developed world, where governments can credibly commit to policy, tax evasion is constrained, and governments are accountable. In this paper, I relax these assumptions. I argue that weak accountability under poor institutions allow government officials to expend less effort to collect social policy contributions, decreasing expected revenues. For most, this is akin to a dead-weight cost that saps support for redistribution. For those with a comparative advantage in tax evasion, however, this allows for free-riding on the contributions of others and decreases the costs of social policy. As institutional quality declines and tax evasion becomes easier, individuals with a comparative advantage in tax evasion should therefore be more likely to support redistribution. I test this argument using public opinion data from a survey of 28,000 individuals in 28 post-communist countries.

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