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Foreign direct investment and governance quality in Russia

Author

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  • Kuzmina, Olga
  • Volchkova, Natalya
  • Zueva, Tatiana

Abstract

This paper studies the effect of poor governance quality on foreign direct investment in Russia. Using a survey of businesses across forty administrative districts, we find that higher frequency of using illegal payments and higher pressure from regulatory agencies, enforcement authorities, and criminals, negatively affect foreign direct investment. Our identification strategy builds on the exogenous cross-regional variation in worker strikes during 1895–1914, the period before the October Revolution. We find that moving from the average to the top governance quality across Russian regions more than doubles the FDI stock.

Suggested Citation

  • Kuzmina, Olga & Volchkova, Natalya & Zueva, Tatiana, 2014. "Foreign direct investment and governance quality in Russia," Journal of Comparative Economics, Elsevier, vol. 42(4), pages 874-891.
    • Handle: RePEc:eee:jcecon:v:42:y:2014:i:4:p:874-891
    DOI: 10.1016/j.jce.2014.08.001
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    More about this item

    Keywords

    Foreign direct investment; Quality of governance; Corruption; Russia;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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