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Bribes and local fiscal autonomy in Russia

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  • Haaparanta, Pertti
  • Juurikkala, Tuuli

Abstract

Russian industrial enterprises inherited from the Soviet era a tradition of producing welfare and infrastructure services within the firm, also for outside users. Despite the massive restructuring of the economy that took place since, many firms are still active in service provision. At the same time, opaque fiscal federalism is a problem for municipalities whereas rent extraction by public sector officials is a problem for firms. In this paper we examine whether there is a link between these phenomena. We propose a model on local fiscal incentives, service provision by firms and the municipality-firm relationship in the form of bribes. Using survey data from 404 medium and large industrial enterprises in 40 regions of Russia, we find that the higher the share of own revenues in the local budget, the more likely the firms are to report bribes. In the case of infrastructure services, the data also support the hypothesis that the channel is through service provision: the less fiscal autonomy, the more service provision and the less likely the firms are to report bribes.

Suggested Citation

  • Haaparanta, Pertti & Juurikkala, Tuuli, 2007. "Bribes and local fiscal autonomy in Russia," BOFIT Discussion Papers 12/2007, Bank of Finland Institute for Emerging Economies (BOFIT).
    • Handle: RePEc:zbw:bofitp:bdp2007_012
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    References listed on IDEAS

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    1. repec:zbw:bofitp:2006_002 is not listed on IDEAS
    2. Tuuli Juurikkala & Olga Lazareva, 2006. "Lobbying at the local level: social assets in Russian firms," Working Papers w0061, Center for Economic and Financial Research (CEFIR).
    3. Tuuli Juurikkala & Olga Lazareva, 2006. "Non-wage benefits, costs of turnover, and labor attachment: evidence from Russian firms," Working Papers w0062, New Economic School (NES).
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    5. Reinikka, Ritva & Svensson, Jakob, 2003. "Survey techniques to measure and explain corruption," Policy Research Working Paper Series 3071, The World Bank.
    6. Guido Friebel & Sergei Guriev, 2005. "Attaching Workers through In-Kind Payments: Theory and Evidence from Russia," The World Bank Economic Review, World Bank, vol. 19(2), pages 175-202.
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    8. Guido Friebel & Sergei Guriev, 2005. "Attaching Workers through In-Kind Payments: Theory and Evidence from Russia," The World Bank Economic Review, World Bank Group, vol. 19(2), pages 175-202.
    9. Scott Gehlbach, 2003. "Taxability and Government Support of Business Activity: Testing Theories of Social-Contract Failure," Working Papers w0028, New Economic School (NES).
    10. Pertti Haaparanta & Tuuli Juurikkala & Olga Lazareva & Jukka Pirttila & Laura Solanko & Ekaterina Zhuravskaya, 2003. "Firms And Public Service Provision In Russia," Working Papers w0041, Center for Economic and Financial Research (CEFIR).
    11. Alexeev, Michael & Kurlyandskaya, Galina, 2003. "Fiscal federalism and incentives in a Russian region," Journal of Comparative Economics, Elsevier, vol. 31(1), pages 20-33, March.
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