Autocratic Elections and Corporate Raiding: a Natural Experiment in Russia

Abstract: Many argue that property rights are rooted in the relative bargaining power of rightholders and rulers (North 1981; Levi 1988; Bates 1989; Goldstein and Udry 2008). However, because bargaining power both influences and is influenced by property rights it is difficult to identify how a change in one affects a change in the other. I explore a plausibly exogenous shift in bargaining power in Russia induced by the surprisingly poor showing of the ruling United Russia party in parliamentary elections of December 2011 to explore how changes in bargaining power shape perceptions of property rights. Using data from a survey of 922 firms conducted across Russia in November and December 2011, I find that a negative shock to the bargaining power of the ruling party helped to level the playing field for some groups of firms. Firms with immobile assets, fewer workers, and some state ownership viewed their property rights as more secure after the elections than before. More specifically, they saw their firm as less likely to be the victim of a hostile (often in the literal sense of the term) takeover after the elections. This suggests that exogenous changes in bargaining power can influence perceptions of property rights; it also reveals that even Russia’s highly imperfect elections shape expectations about property rights.