Explaining Patterns of Corruption in the Russian Regions

Abstract

Corruption is one of the key problems facing the Russian state as it seeks to evolve out of its socialist past. Naturally, regional patterns of corruption exist across a country as large and diverse as the Russian Federation. To explain these variations, we analyze 2002 data from Transparency International and the Information for Democracy Foundation that provides the first effort to measure differences in incidence of corruption across 40 Russian regions. We find that corruption in Russia primarily is a structural problem, and not one related to its institutions. Within each region, the amount of corruption increases as the size of the regional economy grows, the per capita income decreases, and the population decreases. Russian policymakers can therefore work to reduce corruption by encouraging economic development outside of the key centers of Moscow and St. Petersburg. Because the data show that voter turnout also lowers corruption, policymakers can also fight corruption by fostering more political accountability in elections.

Oil and Gas: A Blessing for the Few. Hydrocarbons and Inequality within Regions in Russia

“…Both during the Soviet Era and after the transition to market economy, one of the main characteristics of value distribution has been non-transparency. An important channel of informal rent sharing is represented by corruption, which takes the form of a tax system parallel to the official one (Dininio & Orttung 2004).…”

“…The natural resource sector is usually protected by huge barriers to entry, which leads to the strong position of producers. Where formal institutions are weak, high hydrocarbon-related rents may fuel corruption (Dininio & Orttung 2004). In the Russian case, in the hydrocarbons-rich regions, the power struggle was typically limited to a few key players within the local oligarchy.…”

The Re-Emerging Role of the State in Contemporary Russia

“…The influence of the oligarchs was significantly diminished, especially in the political sector (Goldman, 2003;Tompson, 2005), while asset-stripping behaviour was also dramatically reduced. The federal government curbed regional bureaucracy by adopting the "vertical flow of power" approach and transferring the decision-making power back to the central state (Gregory and Schrettl, 2004;Bahry, 2005;Dininio and Orttung, 2005;Ivanenko, 2005).…”

Whither Corporate Russia?

“…For example, the state became a substantial co-owner in just about all of the major corporations, and crucially exercised its option to have a significant presence within the shareholder bodies, particularly with corporations receiving substantial investment subsidies. The importance of this kind of state-private co-partnership system (SPCS) can be recognised as a monitoring mechanism necessary in order to protect firm-specific investment subsidies from expropriation by investor insiders, which was a widespread practice during the 1990s (Goldman, 2003;Gregory and Schrettl, 2004;Bahry, 2005;Dininio and Orttung, 2005;Ivanenko, 2005;Tompson, 2005). In other words, we argue that SPCS plays a subtle role in preventing inside investors from sub-optimally terminating longer-term investment projects, especially state-subsidized projects.…”