Regional Variation in Business-Government Relations in Russia and China

Explanations for the sharp difference in the economic growth performance of Russia and China under economic reform vary widely. There is a debate over which institutional characteristics are conducive to good growth performance: decentralization and competition among local governments or centralization of control over performance targets. Yet there has been little systematic empirical effort to test the implications of these theories for the behavior of firms. This paper uses data from surveys of firms conducted by the World Bank in 2012 to analyze differences in business-government relations in Russia and China. The findings suggest that differences in levels of administrative decentralization help account for differences in business-government relations in the two countries.