Research

Peer-Reviewed Publications

Effect of Income on Trust: Evidence from the 2009 Crisis in Russia (with Sergei Guriev)

[SSRN link] Accepted for publication in The Economic Journal

This paper draws on a natural experiment to identify the relationship between income and trust. We use a unique panel dataset on Russia where GDP experienced an 8 percent drop in 2009. The effect of the crisis had been very uneven among Russian regions because of their differences in industrial structure inherited from the Soviet period. We find that the regions that specialize in producing capital goods, as well as those depending on oil and gas, had a more substantial income decline during the crisis. The variation in the industrial structure allows creating an instrument for the change in income. After instrumenting average regional income, we find that the effect of income on generalized social trust (the share of respondents saying that most people can be trusted) is statistically and economically significant. Controlling for conventional determinants of trust, we show that 10 percent decrease in income is associated with 5 percentage point decrease in trust. Given that the average level of trust in Russia is 25%, this magnitude is substantial. We also find that post-crisis economic recovery did not restore pre-crisis trust level. Trust recovered only in those regions where the 2009 decline in trust was small. In the regions with the large decline in trust during the crisis, trust in 2014 was still 10 percentage points below its pre-crisis level.

Inside the Kremlin: The Presidency and Executive Branch

A chapter in The New Autocracy: Information, Policy and Politics in Putin’s Russia (ed: Daniel Treisman), Brookings Institution Press, Washington DC, 2018 (order link)

Public Opinion and Russian Politics (with Kirill Rogov)

A chapter in The New Autocracy: Information, Policy and Politics in Putin’s Russia (ed: Daniel Treisman), Brookings Institution Press, Washington DC, 2018 (order link)

Working Papers

Information and Communication Technologies, Protests, and Censorship (with Galina Zudenkova and Maria Petrova)

[SSRN link]

We develop a theory of information flows and political regime change assuming that citizens can use new information and communication technologies (ICTs) for both the information acquisition and protest coordination. The government, in turn, can respond by using censorship in two conceptually different forms: content censorship, or obfuscation, and coordination censorship, or restricting access to ICTs used for coordination. Our theory predicts that, first, introduction of new communication technologies lowers the probability of regime survival, but this effect is weaker in economies that do not rely heavily on ICTs for production. Second, we expect less competent governments to be more likely to use coordination censorship, though this effect is weaker in economies that use ICTs extensively. Third, content censorship is used by the intermediate types of governments. Fourth, both types of censorship are less likely if the costs of protests are higher. We empirically study the patterns of occurrence of DDoS attacks and VPN usage to test the predictions of the model. We find that, consistent with the model, DDoS attacks are used more often if our proxy for regime instability is high, and this effect is stronger in economies that are less dependent on ICTs. We also find that there are fewer DDoS attacks and fewer new VPN subscribers in periods when our proxy for the cost of protests is high.

Information Acquisition and Projecting Invincibility in Authoritarian Electionss (with Michael Poyker)

[SSRN link]

What role do elections play in non-democracies? We propose an empirical test that can distinguish between two major families of theories of authoritarian elections: that elections can be used to maintain an image of invincibility of the regime (Influence Theory), or that elections can be used to get information about the popularity of the regime (Information Theory). While those theories might not be mutually exclusive, we show that they generate different predictions about the spatial allocation of electoral manipulations. Under the Influence Theory, electoral manipulations happen in the areas where the protest sentiments are high. Under Information Acquisition theory, electoral manipulation should happen only in the places where the potential for a successful protest is low. Using the data from 2011 Parliamentary Election in Russia and a regionally representative public opinion survey conducted before the election, we find that electoral manipulations were more likely to happen in the regions where the level of protest potential is lower. When the protest potential goes up by 10 percentage points, the estimates of electoral manipulation in a subsequent election go down by a half of their standard deviation thus corroborating Information Theory.

Manuscripts in Preparation

Exit and Voice: Evidence from Russian Business Elite

I argue that as business elites move their assets abroad, they feel more secure in criticizing government. Focusing on Vladimir Putin’s Russia, I substantiate this argument in three ways. First, I present a simple formal model that shows that—assuming business people are risk-averse and that challenging the government involves some risk—moving some assets out of the ruler’s reach should increase their propensity to criticize. Second, I describe the cases of several prominent members of Russia’s business elite whose behavior exemplifies this mechanism. Third, I offer a statistical evidence. I collected data on announced mergers and acquisitions that involved assets belonging to members of Russia’s business elite. Because some of those deals went through but others failed, I could compare the amount of criticism of Russia’s government expressed by those businessmen who were able to “cash out” to the amount of criticism by others who wanted to do so but failed. To achieve causal identification, I use an instrument for deal completion: the cumulative returns of the S&P 100 index in the six months after the deal was announced in the press. Analyzing a corpus of media interviews by relevant Russian business owners, and using the instrument to adjust for endogeneity, I found that business owners became on average substantially more critical of the government after successfully shifting part of their assets abroad.

How Tax Havens Facilitate Patronal Exchange in Autocracies

This paper looks at the political implications of the rise of tax havens for authoritarian survival. I argue that the tax havens can facilitate a clientelistic exchange between the ruler and the elites: by allowing the elites to move their assets to the offshore financial centers, the ruler can effectively commit to not expropriating them. I offer a simple formalization of this argument and explore its empirical implications. Specifically, I show that once the assets are becoming marginally less secure offshore, the ruler should increase the share of the spoils offered to the elites. I test this implication using the registry-based firm-level financial data on 4452 Russian firms and their connections to the tax havens. I demonstrate empirically that once the Western sanctions in 2014 made Russian assets less secure outside Russia, the tax burden of the offshore-connected firms decreased, thus corroborating my argument. My findings have implications for the study of the role of globalization in authoritarian survival and the study of the fiscal capacity in authoritarian countries.

Political Economy of Cross-Border Income Shifting: A Protection Racket Approach

One of the main threats to the fiscal capacity today is corporate tax avoidance by multinational firms using the affiliates in low-tax jurisdictions. Still, there is a significant unexplained variation in tax compliance by firms. I attempt to explain a part of this variation using a ”protection racket” framework. I argue that because a flow of taxes increases the opportunity cost of expropriation, firms that are more vulnerable to expropriation (have more concentrated revenues and fixed assets, operate in a vertically integrated sector, operate in country that is prone to expropriate firms) are less likely to avoid taxes. Using a registry-based data on firms’ connections to low-tax jurisdictions, I set up a Bayesian multilevel model to explore some of those empirical predictions.

Unknown Unknowns: How Uncertainty Undermines Protest in Russia (with Samuel Greene)

What impact do unexpressed opinions have on contentious politics? In most studies of political opinions, researchers focus on the (relatively) unambiguous categories of ‘yes’ and ‘now’, ‘approve’ and ‘disapprove’, and so on; less often do researchers focus on the other option available to respondents, i.e. to express no opinion at all. In this paper, we explore the phenomenon of non-response to direct political questions in Russia. Drawing on nationally and sub-nationally representative surveys, the paper suggests that using expressed uncertainty as a way of avoiding open dissent may act more powerfully to suppress protest than actual open support for the incumbent regime. By depriving citizens of the ability to know where they stand vis-à-vis prevailing opinions in their community, the paper argues, a prevalence of unexpressed opinions in a given community may make it more difficult for disaffected citizens to make a reasoned decision about whether to protest.