Corruption and microenterprises in Russia

In Russia. compliance with the rules and regulations that govern almost all aspects of economic life has created a hostile environment for microenterprises. Mure serious than the regulations per st. however. is the potential niche they create for opportunistic behavior by regulatory authorities, In Russia. the regulatory state has created a corrupt cadre of government bureaucrats who frequently engage in rent-seeking behavior while enforcing regulations. Firms are not uniformly affected by corruption, however. This paper shows empirical evidence of differential incidence of extortion, based on firm and entrepreneurial characteristics. Corruption in Russia is similar to a regressive tax, and acts as a disincentive to innovation and growth, it may induce technologically inefficient production decisions, and can dilute economies of scale and scope. (C) 2001 Elsevier Science Ltd, All rights reserved.