Government R&D policy and Political Constraints

“The puzzling politics of R&D: signaling competence through risky projects” [Paper available upon request]

Why do some incumbents devote significant funds to the support of Research and Development, even though the fruits of such investment typically appear after the incumbent has left the office? Unlike many other types of long-term government investment (such as education or infrastructure), government investment in R&D is less visible to the average voter. Moreover, it is highly risky. This paper investigates whether the mere fact of incumbent pursuing pro-R&D policy can result in higher expectations of future economic growth rewarded by the voters, or higher perception of the incumbent’s competence. It further asks whether pursuing R&D policy helps the incumbent to secure reelection. The paper proposes a theoretical model of signaling, provides evidence from survey experiments conducted in the USA and Russia and corroborates findings with cross-country evidence. The paper concludes that investment in R&D can generate higher perceptions of the incumbent’s competence, which is crucial, especially for countries with a history of high economic volatility.

“Gaming Patent System, Russian Style”

Government policies targeted at fostering innovation are crucial for economic development. However, on the example of Russian patent system, one can see how a market for innovations fails due to the implementation of government R&D policy. Studying the patents, granted in Russia, one may find numerous examples of patents that cover “technologies” that are not implementable – the chemical reactions that cannot run, etc.. What drives the patentees to spend their resources on the creation of such patents? Innovative firms can not buy fake patents, as they perform an experimental check on their own before buying to lessen production risks. But there is a potential “buyer” for bogus patents: the government decides whether to finance an innovative project with a grant or not based on the number of patents and publications of the researcher. Hence, due to the inadequacy of Russian patent office, fake patents are used not as a signal of the quality of a technology (which can be very low), but as a signal of qualification of a researcher (which is judged on the number of patents, not their quality). This kind of manipulations in the patent system creates information asymmetry at the market of Russian patents, where the innovative firm is the “buyer”, thus lowering the demand for patents (as suggested by data). It also creates distortions at the market for government grants, leading to an inefficient redistribution of resources. Using the data from the Russian Patent Office, I provide evidence consistent with my theory.

How ICT technology changes the architecture and dynamics of social movements

“Stability of Revolutionary Governments In The Face Of Mass Protest” (with Dmitry Dagaev and Anton Sobolev) (Accepted for publication in European Journal of Political Economy)

Why do some newly introduced revolutionary governments face anti-government demonstrations and swiftly exit office, while others can establish political regimes that last for decades? Historical evidence finds revolutionary governments in the first decade of the twenty-first century to be three times more vulnerable to mass protest than a hundred years ago. What can explain this trend? This paper relates the stability of newly emerged revolutionary governments to the political composition of the remonstrations that brings a new incumbent to power and in factors that can shape it. Our theoretical model, incorporating protest into a dynamic Downsian framework, features the significant role of protest coordination, communication technology, ideology, and the coercive capacity of the regime. This paper contributes to the literature in several ways. First, it discusses a new historical trend of the instability of revolutionary governments. Second, it proposes a model that helps to understand the growing instability of revolutionary regimes, as well as conditions that undermine their stability. In equilibrium, it is possible to have a revolutionary government overthrown by a popular uprising, even though it gained power on the wave of popular support. Third, under a set of conditions, the new incumbent would always come from a different part of the political spectrum. Fourth, the model unpacks the warm glow component of protesters’ decision to take to the streets. Finally, we provide implications for the endogenous choice of policy by the revolutionary incumbent for protest dynamics.

“Leaderless Protests?” (with Dmitry Dagaev, Anton Sobolev, and Konstantin Sonin)

A notable characteristic of the 21st-century protests is the absence of leaders. We propose a simple theoretical model of leaderless protests, in which factions with different political agendas unite to topple the incumbent leader. The fractionalization of recent protests become possible as the cost of broadcasting one’s agenda among the group of potential supporters dramatically reduces. Using a dataset that covers 73 countries and 114 protest campaigns from 1946 to 2006, we show that the spread of broadcasting technologies such as radio, TV, newspapers, and Internet in separate regressions is negatively related to the probability that a campaign has discernible leadership. Our quasi-placebo tests for communication technologies that are less efficient in broadcasting potential leaders’ agenda (e.g., mobile and fixed phones) are consistent with the null effect. Both baseline and quasi-placebo results are robust to the inclusion of a wide range of covariates, and to the use of the Heckman approach, IV regression, or non-parametric analysis via Hainmueller and Hazlett (2014) KRLS approach.

Economics and Politics in Russia

“The Role of Business in Shaping Economic Policy” in The New Autocracy: Information, Politics, and Policy in Putin’s Russia, 2018, 137-158, Brookings Institution Press (with Konstantin Sonin)

We examine the role of business in determining economic policy in Russia. On the positive side, the macroeconomic policy under Putin has been consistently conservative. Over the years, the efforts of private business people, supported by professionals within the government, have led to some limited reforms and improved the quality of life of Russian people. In 2016, Russians drove more cars over better roads, have access to a far more full specter of financial services, and enjoy more streamlined bureaucratic procedures than they did in 1999. However, we find that the negative side is no less apparent. Russia’s windfall oil revenues financed the formation of a personalized, archaic political regime. Large private businesses have become inseparable from the state administration. Attempts to create better institutions—never particularly effective—have been replaced by a proliferation of ad hoc, individual projects. With political arrangements set up to keep the current leadership in power, and tiny elites busy exploiting connections to the leader to enrich themselves, we find no reason to expect much-needed economic and institutional reforms to come from above.

“Economic transition and the rise of alternative institutions: Political connections in Putin’s Russia,” in Economics of Transition, 2018, 615-648 (with Konstantin Sonin)

The economic transition from socialism has not resulted in the emergence of impersonal, rule-based institutions. Instead, the natural demand for institutions that protect property rights has led to the emergence of inefficient alternative institutions such as that of cronyism, the practice of appointing personal acquaintances of the political leader to key business-related positions. Once the political leader is entrenched in power, he appoints cronies as a competent subordinate is more prone to switching allegiance to a potential challenger. As competence makes a more significant difference in a rule-based environment, such a leader has no interest in any institutional development. Using the novel dataset that covers the Russian business, we find a positive and significant effect of direct connections to the personal circle of President Putin on the wealth of businesspeople. The magnitude of the effect varies at different levels of rents available for redistribution and “network centrality of a businessman”: it is higher during the years of high oil prices, but is attenuated by the prominence of the businessman in the network.

“Putin’s Strategy After the Global Financial Crisis of 2008-9” in Economic Shocks and Authoritarian Stability: Duration, Financial Conditions, and Institutions, University of Michigan Press (with Daniel Treisman), forthcoming

We examine how the Putin regime adjusted its political strategy—in particular, its use of repression, cooptation, censorship, and propaganda—in response to the global economic crisis. We document several phases of such response: emergency management (2009-2011), characterized by cooptation and public spending to offset the pain felt by the population as the economy contracted, and government reallocation of resources to bail out business interests. This phase ended in mass anti-government protests in the streets of Moscow and the realization that, given the moderate pace of economic recovery, the Kremlin would need to conserve and target its reserves. The principal objective of the second phase was to discredit and marginalize the opposition in the urban areas. Propaganda was stepped up, focused on the theme of traditional Russian values. Cooptation now targeted mostly core supporters—in particular, public sector workers—while repression and censorship (of both media and internet) intensified in an attempt to block collective action and break the momentum of protests. The third phase started with an invasion of Crimea. From late 2013, Putin appeared to give up on a revival of rapid growth. Propaganda rose to an unprecedented pitch, focus now being on military conflict more than traditional values. Controls over media and internet were tightened still more, less at this point to disrupt the protest movement, which had, in any case, died away, than to dominate public discourse.

Measuring Networks of International Relations

A New Measure of State Relationships and Foreign Policy Similarity

International political dynamics depend on the web of state relationships with changes in one relationship influencing changes in others. In empirical studies, the most commonly used approach to model state relationships and interests is a measure of foreign policy similarity called the S-score (Signorino, 1999), which has proven fruitful in hundreds of studies. Unfortunately, this measure has significant, predictable limitations. It does not reflect seminal events in the international system at all, such as the ending of the Cold War, and captures only the similarity of two states’ relations with third states rather than the character of the interactions they have with each other. We, therefore, develop two new measures that have advantages for many scholarly purposes. One reflects foreign policy similarity, as the S-score does, but captures a much more extensive range of state foreign policy interactions. The other is a direct measure of the quality of bilateral relations in a network context. We illustrate the advantages of these measures in a set of cases.