BOFIT Discussion Papers, Institute for Economies in Transition, Bank of Finland
No 12/2007:
Bribes and local fiscal autonomy in Russia
Pertti Haaparanta and Tuuli Juurikkala ()
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.
Keywords: local fiscal incentives; corruption; service provision; Russia; firm survey; (follow links to similar papers)
JEL-Codes: H77; M14; P31; (follow links to similar papers)
31 pages, May 31, 2007
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