Russian Federation : National and Regional Trends in Regulatory Burden and Corruption

Abstract

Using data from business environment and
 enterprise performance survey (BEEPS) and other enterprise
 surveys, studies have shown that firm entry, growth and
 productivity are impeded by corruption and overly burdensome
 regulation. Most of these studies have been based on
 cross-country data (e.g. Barseghyan, 2008), or
 country-specific studies of firms in China (e.g. Cai et al.,
 2011; Cull and Xu, 2005), Mexico (Bruhn, 2011) and other
 nations. Other studies, however, are specific to Russia
 (e.g. Yakovlev and Zhuravskaya, 2007). Cross-regional
 variation in corruption and regulatory burden in Russia are
 potentially important factors in explaining differential
 performance in private sector development, income levels and
 growth rates. The intended audiences of this note are
 policymakers and policy analysts in the non-governmental
 organization (NGO) and academic communities who are
 interested in regulatory reform, corruption, and related
 aspects of the business environment in Russia. A broad range
 of evidence shows that overly burdensome regulation and
 corruption are significant impediments to firm entry,
 productivity and growth. Cross-regional variation in
 corruption and regulatory burden in Russia is a potentially
 important factor in explaining differential performance in
 private sector development, income levels and growth rates.
 Moreover, further research can investigate the extent to
 which distortions in various regulatory and administrative
 areas and transactions may be redundant, in their effects on
 firm entry and growth. Reforms in a limited number of areas
 may show disappointing results, if there are remaining
 distortions sufficient to deter entry or expansion.
 Rent-seekers may be able to substitute one regulatory
 barrier for another in blocking competitors.