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  • ­­­Institutions and Economic Development: The Role of Bureaucracy, and Field Experiments as a Method of Analysing and Evaluating Reforms

­­­Institutions and Economic Development: The Role of Bureaucracy, and Field Experiments as a Method of Analysing and Evaluating Reforms

Priority areas of development: economics
2012
The project has been carried out as part of the HSE Program of Fundamental Studies.

It is widely recognized that institutions are important for economic development. However, the links between the characteristics of specific institutions and economic growth remain largely unexplored.

Research Object: In this research project, we explore these issues by focusing on the case of Russia. Our analysis of Russia’s sub-national units allows us to hold many political and economic factors constant while still observing significant variation in many important variables.

Research Purpose: To apply various research methods for the purpose of exploring the links between institutions and development. This research project consists of two subprojects, each addressing a specific set of questions concerning the relationship between institutions and development.

Elite, Policy and Development: Elite selection and motivation are often assessed as a critical institutional feature to the outcome of economic development. This is particularly true in countries where the state plays a significant role in the economy. That is why we are exploring how the characteristics of the regional elite, the mechanisms of selection and promotion etc, affect the results of policy implementation - economic growth, public goods production, etc.

The Empirical Basis of the Research: A set of databases generated by the Center in 2011-2012:
  • A biographical database containing information on the personal characteristics and career trajectories of Russian governors (1991-present), members of regional governments (2000-present), heads of cities with populations in excess of 75 thousand (2000-present), and the heads of the regional police (2000-present);
  • A database of socio-economic indicators of the Russian regions (for various periods);
  • Characteristics of regional political life (election results, popular surveys data, etc);
  • Additional measures (expert evaluations of the presence of big business in regions, of the conflict between levels of government, etc).
We show that larger, more competitive candidate pools, greater levels of regional democracy, and greater press freedom are all associated with more educated leaders. Hypotheses were developed to study similar phenomena at the municipal level. It was also shown that media freedom has a positive effect on the probability of meritocratic promotions in the regional governments - which, in accordance with the existing literature, stimulates more effective economic policy. Work experience in the private sector makes the governor more likely to spend significant budget money on education (considered a public good).

We also find that businessmen in Russia hold back on investments in the year following a possible change in regional leadership and that investment also drops following the appointment of ‘insider’ governors, or individuals with longstanding ties to the region.

Analysing the factors affecting the allocation of federal transfers to the regions, we also show that economically stagnate regions with strong electoral support for "United Russia" get more largess from the central government than regions growing at a steady clip or that are not supportive of the government. This finding indicates that the central government is often willing to depart from purely economic rationale in its allocation of funds to the regions, sacrificing economic efficiency and growth for policies that reinforce the centre’s political power.

Furthermore, we specifically studied how institutional changes may affect the behavior of the political and economic actors in the spheres of protest, electoral behavior, and economic activities. This behavior was studied using data on the parliamentary elections in Russia in December 2011 and the results of the population survey conducted for the ICSID in the same period, as well as the survey of enterprises conducted in 2011.

One of the factors that is considered crucial for the formation of the protest movements of recent times is the proliferation of the new media and new techniques for spreading information about fraud in elections. We show that usage of Twitter and Facebook, which were politicized by opposition elites (in contrast to other social media), significantly increased respondents' perceptions of electoral fraud, and that the effect is more impressive in the regions with more media freedom.

Participating in elections is another type of political activity. We show that employers can pressure their workers to participate in elections and distort their electoral choices. This is especially likely for large enterprises with non-mobile assets and financial dependence on the state.

Finally, we studied how violence can be used by and along with state structures to affect the behavior of economic actors. We analyzed possible indicators of such pressure, taking into account the diversity of forms this pressure can take and its sources –autonomous agents acting on the request of competitors or on their own initiative, or government agencies themselves.

Experimental Study of Institutions: The second subproject focuses on two topics: the relationship between the citizens and the police (in the context of Russian police reform) and support for the export activities of small and medium-size enterprises. We used survey and lab experiments to investigate the first topic, and elaborated the field experiment methodology (which will be implemented in 2013) for the second one. Experimental questions were included in the representative survey of the Moscow population commissioned by the Center in November and December 2011, as well as the nationwide survey commissioned by the Center in December 2012. Lab experiment with HSE students were conducted in June 2012.

Studying police reforms is interesting for several reasons. First, people who have a legitimate right to violence may use force to stimulate or to suppress various forms of economic behavior. However, the motivation of these persons is usually taken as an assumption. Second, cooperation with the police is a special case of cooperation with the state. The question of why citizens cooperate with the state is one of the central issues of social research.

The results of the survey experiments showed that the citizens’ willingness to cooperate with police in reporting the crime depends primarily on the severity of the crime and the participation of police officers in it. Thus, currently proposed incentive measures - the introduction of monetary compensation and reducing the time needed for submitting applications - do not work properly. Laboratory experiments on related subjects demonstrated that the motivations of police officers and citizens in the proposed system of ‘citizen’ assessment are conflicting.

In addition, field experiments will be devoted to measures stimulating exports by small and medium-sized enterprises. At the federal and regional level, there are various programmes of state support for exports of industrial products - organizational, financial, and advisory tools. However, given limited budget resources, it is better to focus on the most effective state support instruments for export-oriented actors. The field experiment will help to identify such tools. The implementation of the proposed methodology will also allow us to test the applicability of the ‘randomized controlled trial’ method for the design of social and economic policy in Russia. Field experiment as a research approach has not yet been used in Russia. In 2012, we developed the methodology and the plan for the field experiment in partnership with the Moscow government, which will be responsible for actual policy implementation.

Thus, work in the two designated areas allowed us to explore various aspects of the relationship between the institutions and the results of political and economic actors, and, in particular, to show that the value of electoral competition, even under an authoritarian regime with leaders possessing positive qualities, and the changes proposed to the system of incentives for citizens, cannot encourage them to cooperate with law enforcement.

The theoretical importance of the work is to develop the existing theories regarding the incentive effect for the bureaucratic and political elite, as well as its impact on the various indicators of development. In addition, with the help of experimental techniques, the motivation of the actors, which is difficult to detect, has been tested. Finally, the development of a methodology for the field experiment to stimulate exports will make it possible to conduct the first study of its kind in Russia. This has direct practical significance, as the experiment will assess the effectiveness of specific policy measures in force at the regional level.

Publications:


Reuter O. J. Regional Patrons and Hegemonic Party Performance in Russia // Post-Soviet Affairs. 2013. Vol. 29. No. 2. P. 101-135.
Szakonyi D., Reuter O. J. Online Social Media and Political Awareness in Autoritarian Regimes / NRU Higher School of Economics. Series PS "Political Science". 2012. No. 10.
Frye T., Reuter O. J., Szakonyi D. Political Machines at Work: Voter Mobilization and Electoral Subversion in the Workplace / Издательский дом НИУ ВШЭ. Series PS "Political Science". 2012. No. 08.
Noah Buckley, Garifullina G., Reuter O. J. Bureaucratic Appointments in Hybrid Regimes / Издательский дом НИУ ВШЭ. Series PS "Political Science". 2012. No. 11.
Noah Buckley, Frye T., Gehlbach S. G., MacCarthy L. Cooperating with the State: Evidence from Survey Experiments on Policing in Mosscow / NRU Higher School of Economics. Series PS "Political Science". 2012. No. 09.