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News

New article in Journal of Institutional Economics

Journal of Institutional Economics (Cambridge University Press) accepted for publication a new article “Calling the Cavalry: Firm-level Investment in the Face of Decentralized Expropriation” by Israel Marques, Andrei Yakovlev, Anton Kazun and Irina Levina

We congratulate our collegues on the publication!

Abstract: What characteristics of firms give them the confidence to invest in settings rife with expropriation by local officials? Empirically, firms often face the threat of expropriation from local agents of the state rather than a centralized autocrat. Because policing local officials is costly, it is difficult for the state to credibly commit to doing so with negative consequences for investment. We argue that one solution to decentralized expropriation is to allow firms to approach the state directly to ask for intervention. Not all firms are equally able to successfully get the attention of the state, however, so this mechanism only works for a subset of firms. We develop an argument about the firm-level characteristics – large-scale employment, political connections, foreign ownership, and business association membership – that should make the central state more attentive to calls for help. Because such firms are more likely to secure intervention against predatory bureaucrats, the latter are less likely to try to expropriate them. These firms’ investment decisions should be less sensitive to local expropriation than other firms. We test this argument using data on cases of decentralized expropriation across Russia’s regions and firm-level data from a cross-regional, large scale survey of Russian firms.

More information on the website