Working Paper: NBER ID: w17731
Authors: Serguey Braguinsky; Sergey V. Mityakov
Abstract: Foreign-owned firms from advanced countries carry the culture of transparency in business transactions that is orthogonal to the culture of hiding and insider dealing in many developing economies and economies in transition. In this paper, we document this using administrative data on reported earnings and market values of cars owned by workers employed in foreign-owned and domestic firms in Moscow, Russia. We examine whether closer ties to foreign corporations result in the diffusion of transparency to private Russian firms. We find that Russian firms initially founded in partnerships with foreign corporations are twice as transparent in reported earnings of their workers as other Russian firms, but they are still less than half as transparent as foreign firms themselves. We also find that increased links to foreign corporations, such as hiring more workers from them, raise the transparency of domestic firms. An important channel for this transmission appears to be the need to keep official wages and salaries of incumbent workers close to wages domestic firms have to pay to their newly hired workers with experience in multinationals.
Keywords: foreign corporations; transparency; Russian economy; administrative data
JEL Codes: K42; P37
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Foreign ownership (F23) | Transparency of reported earnings (G38) |
| Links to foreign corporations (F23) | Transparency of domestic firms (F23) |
| Fraction of workers hired from multinationals (F29) | Transparency of domestic firms (F23) |
| Foreign-owned firms (F23) | Reported employee earnings (J31) |
| Workers moving from multinationals (F29) | Transparency in domestic firms (G38) |