The goal of this paper is to present quantitative tools to manage competition policy analysis in two‐sided platforms, based on a common framework for transaction and non‐transaction platforms. We explore tools for relevant market definition [Critical Loss Analysis and a small but significant non‐transitory increase in price (SSNIP) test], unilateral effects indicators [Upward Pricing Pressure (UPP) and Gross Upward Pricing Pressure Index (GUPPI)] and tests for exclusionary practices. We review dispersed results in the literature and fill the gaps where appropriate. We highlight the required changes from the usual one‐sided market framework and tools. While discussions of antitrust tools can be found in specialized forums devoted to advances in competition policy analysis, we organize the material in an integrated framework.
The personal role of sub-national rulers is crucial for regional development in countries with weak institutions. This paper studies the impact of regional governors’ tenure in ofﬁce and their local ties on procurement performance in Russia. To identify the causal effect, we construct instruments for governor’s tenure by exploiting the regional vote share of ruling party in past parliament elections. We ﬁnd the evidence that governors who do not have pre-governing local ties in the region (outsiders) demonstrate predatory behaviour, compared to governors with local ties (insiders). Namely, governors-outsiders restrict the competition at awarding stage signiﬁcantly more than governors-insiders. Moreover, for governors-outsiders this restriction becomes stronger with tenure in ofﬁce, while governors-insiders do not demonstrate such negative tenure effect. We argue that this restriction of competition by governors-outsiders cannot be explained by the intention of better contracts execution: the delays in execution and the probability of contract termination either increase or keep stable with tenure for governors-outsiders and these outcomes decrease with tenure for governors-insiders.
This article investigates the role of boards in founder-managed firms with concentrated ownership in emerging markets. The literature frequently suggests that in this type of companies, boards have little influence on the corporate decision making. The article conducts a case study of AFK Sistema—a large Russian founder-managed firm with concentrated ownership. We observe that, contrary to the expectations, in this company, the founder provided real authority to the board, at the same time focusing on recruiting independent (mainly foreign) members. Based on this case, we argue that selectively empowering boards in this type of ownership setting could be beneficial for the firm: Selective empowerment is a source of intrinsic motivationfor the independent board members, making them proactively search for new projects and assist in their implementation on behalf of the firm. As a result, the company can overcome a number of important barriers in its development.
What characteristics of firms give them the confidence to invest in settings rife with expropriation by local officials? Empirically, firms in the developing world often face the threat of expropriation from local agents of the state rather than a centralized autocrat. Because policing local officials is costly, the state cannot easily credibly commit to doing so. This has negative consequences for investment. We argue that one solution 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 some. 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 firm with these characteristics 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.
A judicial review of the infringement decisions of the competition authority substantially affects the standard of evidence in competition enforcement as well as the structure of cases that the competition authority takes. Enforcement against concerted practice in Russia represents a case-study of interaction between commercial courts of first instance, the Highest Court, the competition authority as enforcer, market participants and the legislator to influence the standards of liability under investigation of concerted practice. We examine the judicial review of infringement decisions on concerted practice and track the evolution of legal definition and sufficiency of evidence in such cases. We show, first, that in Russian enforcement, the ability of the Highest Court to influence the criteria of first instance courts is limited (in contrast to the ability of the first instance court to influence the strategy of enforcement by the competition authority). Second, the increase in the burden of proof motivates the competition authority to refrain from an investigation of concerted practice, in accordance with the prediction of the model of the selection of enforcement target by reputation-maximizing authority.
Accountability—constraints on a government’s use of political power—is one of the cornerstones of good governance. However, conceptual stretching and a lack of reliable measures have limited cross-national research on this concept. To address this research gap, we use V-Dem data and innovative Bayesian methods to develop new indices of accountability and its subtypes: the extent to which governments are accountable to citizens (vertical accountability), other state institutions (horizontal accountability), and the media and civil society (diagonal accountability). In this article, we describe the conceptual and empirical framework underlying these indices and demonstrate their content, convergent, and construct validity. The resulting indices have unprecedented coverage (1900–present) and offer researchers and policymakers new opportunities to investigate the causes and consequences of accountability and its disaggregated subtypes. Furthermore, the methodology provides a framework for theoretically driven index construction to scholars working with cross-national panel data.
The moderate extent to which many competition authorities (CAs) worldwide apply concepts, tools and techniques developed by modern economic theory remains a puzzle for both academics and authorities themselves. In the model of reputation-maximizing CA developed by Katsoulacos (2019), in which decisions are subject to judicial review, the choice of the legal standard (LS) in a particular case is explained by the cost of litigation and anticipation of the LS adopted by the appeal courts. In this article, we empirically test, using a dataset of decisions reached by the Russian CA, the relation between the LS adopted and the annulment rate of appealed decisions and show that this is consistent with the assumptions of reputation-maximization choice. The implications of the analysis allow us to conclude that, first, the model of rational reputation-maximizing authority can explain the extent of economics utilized by CAs; second, the role that courts play in the administrative (in contrast to prosecutorial) model of competition enforcement is higher than is widely believed.
The transition from a short-term cost-plus tariff regulation to either a long-term rate-of-return or long-term price cap regulation in Russia started in 2009 and was completed in 2012, causing substantial changes in investment over the course of the reform. We estimate panel data of 46 Russian electricity distribution entities with a dynamic investment model using the system generalized method of moments and addressing potential endogeneity issues. We show that, despite the noncredible regulatory policy, the transition from short-to long-term regulation had a positive and significant effect on the investment rate of regulated entities. The specific long-term regulation design applied in Russia from 2008 to 2017 (either rate-of-return or price cap) had no effect on the investment rate. These results are important for the introduction of changes in regulatory frameworks in developing countries.
How and when are governments able to encourage firms and schools to work together to develop workers' skills? Upgrading the quality of human capital in the workforce is widely seen as a key challenge faced by countries looking to escape the “middle income trap.” Growing attention has been paid to public-private partnerships (PPP) between individual firms and schools as a powerful tool for meeting this challenge, but key facilitators of PPP thought crucial in existing studies – strong, independent employers' associations and labor unions – are often missing in such settings. To explore the emergence of PPP in skill development in the developing world, we draw on recent reform experiences in Russia's regions that have led to a surge in complex, costly forms of PPP despite weakly developed business associations and unions. We argue that variation in the administrative capacity of regional governments and their political accountability explains this surge. Strong administrative capacity reassures all parties that regional authorities can monitor their counterparties' compliance with agreements, while political accountability creates incentives for authorities to do so. We test our argument using original data on the existence and content of firm-school partnerships across all Russia's regions for 2013.
How and when are governments able to encourage firms and schools to work together to develop workers’ skills? Upgrading the quality of human capital in the workforce is widely seen as a key challenge faced by countries looking to escape the “middle income trap.” Growing attention has been paid to public-private partnerships (PPP) between individual firms and schools as a powerful tool for meeting this challenge, but key facilitators of PPP thought crucial in existing studies – strong, independent employers’ associations and labor unions – are often missing in such settings. To explore the emergence of PPP in skill development in the developing world, we draw on recent reform experiences in Russia’s regions that have led to a surge in complex, costly forms of PPP despite weakly developed business associations and unions. We argue that variation in the administrative capacity of regional governments and their political accountability explains this surge. Strong administrative capacity reassures all parties that regional authorities can monitor their counterparties’ compliance with agreements, while political accountability creates incentives for authorities to do so. We test our argument using original data on the existence and content of firm-school partnerships across all Russia’s regions for 2013.
This study presents a snapshot of investment projects in manufacturing that were implemented by foreign investors in Russia during 2017–2018. We assemble a unique database of all new plants opened by foreign companies in Russia during 2012–2018 to clarify the distribution of investment projects implemented during 2017–2018 across industries and territories with different tax regimes. We also identify the most interesting individual investment projects, interrelated investment projects, and elements of collective actions. In general, foreign investors in manufacturing demonstrate high ingenuity in discovering and exploiting the remaining emerging growing market segments and promising niches in consumer and professional markets and express significant persistence in realizing investment projects. We also demonstrate the methods applied to decrease the uncertainty of the project costs by establishing partnerships with local foreign- and domestically owned companies and the attempts to correct the government’s decisions and regulatory measures that are uncomfortable for foreign investors.
This paper investigates the links between investment activity and personal contacts for small and medium-sized firms with public officials at the sub-national level in Russia. A list-experiment design, using a survey of 21,000 Russian firms in 2017, was used to evaluate the importance of personal connections with officials for conducting business. A total of 27% of firms without investment and 37% with investment considered personal connections with officials an important factor for doing business. The importance of such contacts was lower in regions with a better investment climate. However, a higher proportion of firms were likely to invest in the regions where higher importance was placed on political connections. Therefore, in Russia in the mid-2010s, investment from politically connected firms did not crowd out investment from other firms. Although the available data did not allow causality to be defined, the research shows that political connections are important for investors in emerging markets and that the importance of political connections diminishes with improvement in the business climate. This paper provides a quantitative estimate of the relationship between political connections and firm investment in Russia, an example of large emerging economy. This relationship is moderated by institutional quality at the subnational level. The results provide empirical support for the theory of limited access orders elaborated by North, Wallis, and Weingast (2009), and stress the importance of rents and their productive utilization for the development of emerging economies.
During the past few decades, many developing countries have initiated public procurement reforms. One of their prime objectives was to limit corruption, enhance competition, and reduce the scope of procurer opportunism. However, radical changes in regulations have resulted in the emergence of new opportunities for opportunism this time on the supplier side.
What conditions enable governments, educational institutions, and enterprises to organise joint, comprehensive technical and vocational education systems (TVET) in developing and transitional countries? This paper explores this question on the basis of an original survey of enterprises in 12 Russian regions designed to determine the factors affecting local adoption of German-style ‘dual education’ in TVET. We distinguish between firm-level and regional-level factors influencing firms to form institutionally costly partnerships with vocational schools and government entities for the sake of upgrading skill formation. Our findings point to the importance of state intervention in fostering and enforcing firm-school partnerships in settings lacking the dense network of labor and business organizations characteristic of coordinated market economies in Western Europe.
Since about 2009, increasing budgetary constraints forced the Russian state to become notably less tolerant of lower-level corruption and predatory behavior by state agencies. In this paper, we argue that after a first stage of decentralized corruption and state capture during the 1990s, and a second period of decentralized corruption and business capture during the 2000s, Russia has entered a third stage of more centralized corruption since 2009. We build our argument on a detailed discussion of property rights relations in Russia, and support it with indicative quantitative data, suggesting that raiding attacks on businesses and corrupt behavior by state agencies have become less frequent and more centralized between 2009 and 2016. The sustainability of this move towards a more centralized mode of corruption remains questionable, however, mainly due to the lack of a long-term vision for the development of the country.
We explore the meaning of rituals of public plant-opening ceremonies, which are popular in many countries and mandatory in Russia for greenfield investment projects implemented by multinational corporations. The study is based on the analysis of videos from the public opening ceremonies supplemented with the analysis of financial data on the studied industrial projects. We argue that in a country with underdeveloped physical infrastructure and volatile business regulations opening ceremonies for new industrial projects have three implications: 1) such events are festivities which are centered on an exchange of gratitude between foreign investors and the local authorities for their non-opportunistic behavior; and 2) such events serve as “the rite of passage” of a newly-built facility into the local business and social infrastructure; 3) assurances in speeches during opening ceremonies about the long-term nature of industrial projects are taken seriously as obligations and serve as an additional barrier to exit from industrial assets.
This paper analyzes the process of renegotiation of the informal contract between the regional and federal elites of Russia after the economic crisis. We use the database of Center of Public Procedures’ “Business against Corruption” to show that, after 2011, regional elites in Russia lost the preexisting opportunity to extract rents from businesses in return for favorable election results for Vladimir Putin and United Russia. We also analyze the connection between the level of corporate raiding in various Russian regions and the political competition, tenure, and ties of their governors. We show that there are two distinct models for fighting raiding in a region: an authoritarian model for suppressing negative signals and a competitive model with the creation of a new consensus among the elites. Although both models are similar in terms of the absence of negative signals, they have very different consequences in the business context of an area.
In the modern world, competition policy is an important part of global governance. Coordination of efforts between different countries is not an easy task, because the distribution of gains and losses from anticompetitive conducts is uneven across the globe. We identify joint interests of BRICS to influence international competition policy regime and analyse the effects of domestic enforcement on global markets. Among the targets of competition enforcement with large effects on global markets are conducts of international property rights holders. BRICS authorities apply remedies in order to weaken intellectual property rights (IPR) protection, both under merger approval and infringement decisions on unilateral conducts.
Similarity of the rules on merger control in BRICS gives reason to believe that global governance in the form of a supranational advisory body with the right of legislative initiative is possible in this area. On the other hand, a review of existing legislation and the institutional structure of BRICS enforcement indicates that enforcement against anticompetitive conducts is unlikely to become the focus of coordinated action.
Effective systems of vocational education are crucial to economic and social development. However, coordination of labor market demand and supply of skill requires either well-functioning labor market institutions or institutionally-embedded strategic partnerships among government, labor, and employers. In particular, the transplantation of German-style dual education methods to a different environment poses significant institutional dilemmas. Russia presents a useful case for examining the conditions under which such arrangements can be established. Based on a series of interviews in six Russian regions and a set of case histories, we seek to draw testable hypotheses that can be applied to other settings.