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Foreign Direct Investment and Governance Quality in Russia

  • Olga Kuzmina

    ()

    (New Economic School)

  • Natalya Volchkova

    ()

    (New Economic School)

  • Tatiana Zueva

    ()

    (New Economic School)

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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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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