Benefits of entry control: the Russian case

This article compares an original theory of gatekeeping and public choice theory, confronting them with data from an emerging market, Russia. It argues that the former theory produces riskier predictions than the latter one. The Popperian criteria for falsification of a theory suggest that the riskier the predictions the theory produces, the more confidence we have in the outcomes of its falsification. Theory of public choice predicts that either the government wins and business loses (the tollbooth hypothesis) or business wins and the government loses (regulatory capture theory). The theory of gatekeeping predicts that both the government and business win. Furthermore, the third agent's (the population's) pecuniary interests are also supposedly associated with the interests of the first two agents. A series of econometric tests using sub-national data from Russia show that the gatekeeper's interests are indeed positively associated with the interests of the businesses that manage to get admitted to the field of transactions. The population's interests also turn out to be correlated with the interests of the gatekeeper and business. The gains of the three agents tend to be unequally distributed, however. The market system in Russia ultimately works in the interests of state representatives who assume the gatekeeper's role and to a lesser extent in the interests of selected businesses.