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Working paper

Local Government and Small Business: Mismatch of expectations

Plusnin J., Slobodskoy-Plusnin J.
  The article summarizes the data from a few tens of interviews with entrepreneurs – representatives of a small business. The purpose of the interview was to discover expectations and suggestions from entrepreneurs to the local and state government. Interview data reveal the profound contradictions between the business and the authorities. These contradictions are based not only on results of the local administration’s actions, but also on the specific current status of local (self-)government that makes it impossible to effectively interact with the business. On the other hand, the development of local businesses has led to a peculiar configuration of the business community, also making it difficult to communicate with the authorities. As a result is trying to get protection from the local government that leads to inadmissible merging of business and government and monopolizing of business in almost every district. Direct consequences of such a merging are government inefficiency, lack of incentives for business development, and stagnation. Some “evolutionary stable strategy” has been developed, that does not allow winning any of the actors yet saving them from loses in competition with the outside players. Understanding of the inefficiency and dead-end of such an interaction by some entrepreneurs forces them to raise claims to local authority. Interviews analyses resulted in the list of complaints and suggestions on how to optimize an interaction between the local business and local authorities.