Power Shift between Interest Groups: The Political Economy of Transition in the Russian Federation
EERC-CEFIR Conference in Moscow

The transition changed the structure and relative power of interest groups in Russian society, dramatically altering the way interests translate into policy. Over the course of the transition, the shape of the institutions that frame the political decisionmaking process has itself become a matter of political bargaining.

· Torsten Persson (IIES, Stockholm University); Guido Tabellini (Bocconi University, Milan); and Francesco Trebbi report that corruption is inherently related to electoral rules. In "Electoral Rules and Corruption," they argue that larger voting districts and individual, as opposed to party, lists of candidates are associated with less corruption. Torsten Persson and Guido Tabellini ("Political Institutions and Policy Outcomes: What Are the Stylized Facts?") investigate the effects of electoral rules and political regimes on the size and composition of government spending and government deficit.

· In "The Political Economy of Latin American Growth," Francisco Rodriguez (University of Maryland) discusses how such factors as political instability, inequality in the distribution of political and economic power, corruption, rent-seeking by national governments, and a combination of populist policies and policies benefiting powerful vested interests can account for the region’s poor growth performance.

· Gérard Roland (ECARES, Université Libre de Bruxelles; CEPR) synthesizes the main lessons from 10 years of transition. He compares various political and economic aspects of two approaches to reform: the Washington consensus (the shock-therapy view) and the evolutionary-institutionalist perspective (the gradualist view). He analyzes the impact of transition research on economics in general, emphasizing the role of the institutionalist perspective in modern economic research.

· In "Political Economy of Scale and Endogenous Rule of Law," Leonid Polishchuk (IRIS; University of Maryland) argues that if the rule of law is not a matter of indisputable legal and political tradition but rather a policy variable for the government, the investment climate depends not only on the government’s decisions but also on the number of investors. Thus a shock that increases the need for external investment might lead to higher investments and better enforced rule of law.

· Ekatherina Zhuravskaya (CEFIR, Moscow; CEPR) presented two papers on tax arrears and subsidies, "Determinants of Government Subsidies to Industrial Firms: Firm-Level Evidence," written with Zhenia Orlov (NWU and Lena Paltseva (CEFIR and SITE), and "Federal Tax Arrears: Liquidity Problems, Federal Subsidies, or Regional Protection," written with Maria Ponomareva (Northwestern University). She and her coauthors claim that common explanations of federal tax arrears—such as the lack of liquidity in enterprises and the federal government’s willingness to implicitly subsidize firms by tolerating arrears—are inconsistent with the data. The evidence suggests that in the second half of the 1990s, regional governments’ political resistance to federal tax collectors caused the accumulation of federal tax arrears.

· In "Models of Transition and Multi-Stage Reform," Allan Drazen (University of Maryland) summarizes some of the main conclusions from his recent textbook on political economy.

For more information, please visit www.eerc.ru or www.cefir.org.