Political Uncertainty as an Economic Risk Factor: the Regional Perspective from Russia

The academic circles and media commonly associate political uncertainty with aggravated economic risks, discouraged investments, and stunted economic growth. The goal of this survey is to explore the reaction of domestic businesses to political signaling. It allows addressing a key question regarding the perception of uncertainty in Russia: how sensitive are the economic agents to political trends? How robust is their assessment of the extent to which the rules of the game are changing, and what are the threshold levels of political change at which the uncertainty begins to affect economic decisions? Due to the sensitive nature of questions, a large-N randomized selection was not feasible, and we relied on a small sample of convenience. The study focuses on the case of Nizhny Novgorod region in Russia and is based on a survey of the owners and employees of small-and medium-size businesses. The data, collected in 2014 and 2015, provides tentative insights into the correspondence between political signals and local economic calculus in today's Russia. The study demonstrates that the local businesses are aware of the political costs, especially high levels of corruption and the general arbitrariness of power. They also appear to dismiss the probability of substantive changes in political status quo.