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Foreign Direct Investment and Governance Quality in Russia

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Author Info

  • Olga Kuzmina

    ()
    (New Economic School)

  • Natalya Volchkova

    ()
    (New Economic School)

  • Tatiana Zueva

    ()
    (New Economic School)

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.

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Bibliographic Info

Paper provided by Center for Economic and Financial Research (CEFIR) in its series Working Papers with number w0205.

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Length: 38 pages
Date of creation: Apr 2014
Date of revision:
Handle: RePEc:cfr:cefirw:w0205

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Keywords: foreign direct investment; quality of governance; corruption; Russia;

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  1. Djankov, Simeon & Glaeser, Edward & La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei, 2003. "The new comparative economics," Journal of Comparative Economics, Elsevier, vol. 31(4), pages 595-619, December.
  2. Javorcik, Beata S. & Wei, Shang-Jin, 2009. "Corruption and cross-border investment in emerging markets: Firm-level evidence," Journal of International Money and Finance, Elsevier, Elsevier, vol. 28(4), pages 605-624, June.
  3. Daron Acemoglu & James A. Robinson, 2006. "De Facto Political Power and Institutional Persistence," American Economic Review, American Economic Association, American Economic Association, vol. 96(2), pages 325-330, May.
  4. Daron Acemoglu & Simon Johnson & James A. Robinson, 2000. "The Colonial Origins of Comparative Development: An Empirical Investigation," NBER Working Papers 7771, National Bureau of Economic Research, Inc.
  5. Dang, Duc Anh, 2013. "How foreign direct investment promote institutional quality: Evidence from Vietnam," Journal of Comparative Economics, Elsevier, vol. 41(4), pages 1054-1072.
  6. Martijn Boermans & Hein Roelfsema & Yi Zhang, 2011. "Regional determinants of FDI in China: a factor-based approach," Journal of Chinese Economic and Business Studies, Taylor & Francis Journals, Taylor & Francis Journals, vol. 9(1), pages 23-42.
  7. Henisz, Witold J, 2000. "The Institutional Environment for Multinational Investment," Journal of Law, Economics and Organization, Oxford University Press, Oxford University Press, vol. 16(2), pages 334-64, October.
  8. Bruce A. Blonigen, 2005. "A Review of the Empirical Literature on FDI Determinants," NBER Working Papers 11299, National Bureau of Economic Research, Inc.
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