Firms and social policy preferences under weak institutions : Evidence from Russia

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Title: Firms and social policy preferences under weak institutions : Evidence from Russia
Author: Marques II, Israel
Organization: Bank of Finland
Department / Unit: Institute for Economies in Transition (BOFIT)
Series: BOFIT Discussion Papers
Series number: 7/2018
Year of publication: 2018
Publication date: 23.2.2018
Pages: 43
Subject (yso): yritykset; verotus; veronkierto; työmarkkinat; hyvinvointivaltio; politiikka; sosiaalipolitiikka
Keywords: Bofit-kokoelma; Venäjä
JEL: L21; L33; O15; 017; H53
Other keywords: labor markets; firm preferences; tax evasion; politically connected firms; welfare state; comparative political economy
Abstract: When does business support the expansion of social policy in the developing world? Existing work on managers’ preferences has tended to concentrate on the developed world, where governments can credibly commit to policy, tax evasion is constrained, and mechanisms exist to hold the bureaucracy accountable for policy implementation. In this paper, I relax these assumptions, arguing that weak institutions create opportunities for some firms to shift costs onto others: making social policy more attractive. I argue that firms with political connections are uniquely positioned to benefit from subsidies and property rights protection, which decreases the cost of social policy, while firms with low visibility can evade taxes and free-ride off universalistic social policy. Such firms will support social policy even where institutions are poor. I test this argument using a survey of 666 firms in 10 Russian regions.
Rights: https://helda.helsinki.fi/bof/copyright


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