Verification of compliance with the norms and rules of fire bezopasnostyu Alexei smyshlyaeva / Interpress / TASS
Held in a “zero” deregulation of business has contributed to the growth of small companies, however, the actual effect of the reform depended on local officials
National research University “Higher school of Economics”, Russian economic school, Ural Federal University named after Boris Yeltsin, the Association of independent centers of economic analysis (ARETT), Institute of world economy and international relations Russian Academy of Sciences and the business magazine “expert”, in 2009 founded the National prize in applied Economics for outstanding published research papers on analysis of Russian economy. The prize is awarded every two years. The winners of the prize of 2016 were Ekaterina Zhuravskaya, Professor at the Paris school of Economics, Evgeny Yakovlev, Professor and Director of the Data centre NES for the work “the Effect of Liberalization on the example of the Reform of Business Regulation in Russia”. Forbespublishes a column by one of the authors of the study.
Helpful or harmful regulation of the economy? In the absence of regulation, we have MMM, bubbles and double sales in the real estate market, a sharp increase in mortality from alcohol in the early 1990s.
I mean, Yes, regulation is needed. However, it need not always and not everywhere, and often only in moderation.
Indeed, it is clear why you need to license and control the quality of products from the company that produces the vodka or vital medication, but do to high demands a small company selling notebooks or pencils?
If you look at small business, it generally does not produce dangerous products or products, having adverse effects on other participants in the market (externalities), is not a monopoly, preventing other firms to enter the market and overestimating the prices for socially significant goods. That is, in most cases, the regulation allows to control adverse effects from work for such firms don’t need.
However, it is a small business — and not only here but in many other countries was regulated, and controlled excessively. Why is it so? For example, because small businesses can provide substantial opposition to the controlling and regulatory authorities and often a cash cow for bureaucrats.
Understanding of this fact has led to the fact that in the late 1990s and early 2000s, many countries (more than 50) have started to implement reforms for deregulation of businesses.
Not lagged behind these countries and Russia. In 2001-2005, there was held one of the largest by global standards, reforms aimed at liberalization of the business. Were significantly lowered the costs of firms for certification, licensing, business registration, narrowed the powers of the regulatory authorities, reduced the list of areas of the economy, which should be regulated by, and finally simplified taxation.
The objective of our work was to study the effect of this reform. We asked a few questions and answered them.
First question: does decreased as a result of reform the costs of regulation? We showed that the reform had the effect. Costs of firms associated with the passage of various regulatory procedures, the national average has dropped significantly.
The second question we asked: in what way have successfully passed the reform in different regions and why some regions it was more successful than in others?
We found that the effect of the reforms was uneven. In regions with more transparent local government with a more informed population, more interested in reforms and a strong business lobby, as well as in the regions with greater autonomy, reform was better. The reason is simple — all these factors directly affect the interest of local business and government reforms, but the interest enhances the ability to lobby for reform.
And finally, last question: did liberalization on the growth of small business?
From the point of view of empirical science to answer this question is not so simple. If the researcher is trying to study the impact of reforms on the development of business, simply take the correlation between changes in regulation and the dynamics of business, he can come to wrong conclusions. For example, oddly enough, the data often show a positive correlation between growth of firms and the level of regulatory pressures on the firm. But this does not mean that increasing regulation will lead to growth of the company. This is likely to mean that fast-growing firms more likely to face regulatory loads as they enter new markets, release new products and to do this they need to undergo a new procedure.
To separate the correct causal relationship helped us just regulatory reform, as it is similar to the classic experiment. For any firms fast-growing or not, the reform changed the adjustment costs. We compared costs and the growth of firms before and after reform, and thus were able to distinguish the net effect of (de)regulation in the growth of the business.
We showed that in regions with good institutions, liberalization had a substantial positive effect on the growth of small business. In these regions firms showed greater growth in them (in the regions) increased and the number of firms and the number of people employed in small business. In regions with a poor institutional environment, we did not find a positive effect of deregulation of business.
To better understand the results, consider for example two regions: Samara and Amur region.
In the early 2000-ies of the Amur region had one of the lowest among 20 regions of the studied indicators of institutional quality. The district was 17th out of 20 in the transparency of the local governing bodies, on the penultimate place in terms of fiscal incentives and the development of the Internet. Samara region was among the best — ranked fourth in terms of transparency of the government’s second fiscal stimulus and the first power of industrial lobbies.
To compare outcomes for these two regions from the reform, we compared the percentage of firms with registration do get “single window”, what percentage of firms are not faced with the need to obtain a license in areas that are not regulated by law, and finally how many firms meet with the inspection bodies only once a year and no more.
According to the results, in the region similar in characteristics with the Amur region, the share of such firms increased by 1%, while in the regions, like Samara region, 12%. As a result, in the region, similar in specs with the Samara region, liberalisation of inspections led to the growth of turnover of small businesses is 12%, the liberalization of licensing has increased the volume of small business is 4%, the liberalization of registration procedures has increased employment in small business by 1%. In the same region, similar in characteristics to the Amur region, reforms have not led to the growth of small business.
