Import of Institutions as an Approach to Investment Climate Reform: Evidence from Russia

Abstract

Institutional quality has a significant impact on indicators of investment activity both at the national and regional level. Studies show that regions of Russia with a more favorable institutional environment attract more foreign direct investements (FDI). In 2012 the Russian government introduced the reform package called the Regional Investment Standard that involves import of economic institutions and best investment climate practices from the advanced regions of Russia to the less developed ones. This paper aims to provide an empirical assessment of the effectiveness of the Regional Investment Standard. The study is based on a unique dataset collected during a series of polls and structured interviews with investors and government officials in nine Russia's regions. The results of the study show that reduction of administrative barriers for investors is the most significant result of this reform package. However, the Regional Investment Standard does not have any positive impact on the level of investors' rights protection and does not create the necessary tax incentives for investors. We consider it expedient to create for each region an individual reform plan in the form of supplement to the Regional Investment Standard. It is also necessary to organize at the federal level a system of stimulating and monitoring the implementation of reforms. (JEL H77, P48, R58)