Roving Bandits in Action: Outside Option and Governmental Predation in Autocracies

Kyklos. 2012. Vol. 65. No. 4. P. 526–562.

Libman A., Kozlov V. A., Schultz A.

The paper investigates the influence of an outside option, i.e. the opportunity to continue one’s career outside the territory currently controlled, on the predatory behavior of the autocrats. Using the data on effectiveness of tax collection and repressiveness of tax jurisprudence in Russian regions in 2007-2009 it demonstrates that regions ruled by governors with larger outside options were characterized, on the one hand, by more repressive behavior of tax authorities, but on the other hand, by smaller additional revenue of the public budget through the tax collection. It conjectures that presence of an outside option induces the ‘roving bandit’ behavior by the autocrats: they use tax auditing to establish control over regional business, but in turn exploit this control to extract private rents rather than revenue for the regional budget used to produce public goods.

Keywords: экономическая политика, roving and stationary bandit, tax auditing, predatory government, Russian federalism, российская модель федерализма, оседлый бандит, кочующий бандит, налоговая проверка, государство-хищник, экономико-математические методы и модели, государственное регулирование экономики, управление социально-политическими процессами