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International audience; How do the internet and social media affect political outcomes? We review empirical evidence from the recent political-economy literature, focusing primarily on the work that considers traits that distinguish the internet and social media from traditional offline media, such as low barriers to entry and reliance on user-generated content. We discuss the main results about the effects of the internet, in general, and social media, in particular, on voting, street protests, attitudes toward government, political polarization, xenophobia, and politicians’ behavior. We also review evidence on the role of social media in the dissemination of false news, and we summarize results about the strategies employed by autocratic regimes to censor the internet and to use social media for surveillance and propaganda. We conclude by highlighting open questions about how the internet and social media shape politics in democracies and autocracies.

International audience; How effective is fact checking in countervailing “alternative facts,” i.e., misleading statements by politicians? In a randomized online experiment during the 2017 French presidential election campaign, we subjected subgroups of 2480 French voters to alternative facts by the extreme-right candidate, Marine Le Pen, and/or corresponding facts about the European refugee crisis from official sources. We find that: (i) alternative facts are highly persuasive; (ii) fact checking improves factual knowledge of voters (iii) but it does not affect policy conclusions or support for the candidate; (iv) exposure to facts alone does not decrease support for the candidate, even though voters update their knowledge. We find evidence consistent with the view that at least part of the effect can be explained by raising salience of the immigration issue.

International audience; Poland was divided among three empires—Russia, Austria–Hungary, and Prussia—for over a century until 1918. The partition brought about divergence in culture, institutions, and economic development. We use spatial regression discontinuity to examine, which empire effects are persistent. We find that differences in incomes, industrial production, education, corruption, and trust in government institutions disappeared with time as they were smoothed by economic forces and policy intervention. In contrast, differences in intensity of religious practices and in beliefs in democratic ideals, i.e., democratic capital, persist presumably via inter-generational within-family transmission. Differences in railroad infrastructure built by empires during industrialization persisted to this day. Cultural empire legacies have an effect on the political outcomes in contemporary Poland.

All over the world market-dominant minorities are victims of ethno-religious hatred and violence. This paper aims to test the theory that ethnic violence had pragmatic economic roots and ethnic violence was directly related to occupational segregation across ethnicities against the alternative “scapegoat theory,” according to which Jews were blamed for all economic misfortunes of the majority. In order to test these theories, we focus on pogroms between 1800 and 1939, i.e., episodes of anti-Jewish violence, in the Pale of Settlement, where Jews were confined to live within the Russian Empire. We combine a novel data set on pogroms and the professional and ethnic composition of the Russian Empire with data on historical climate and yield data. Using fixed-effects model, we document that heat stress in growing season, i.e., spring, leads to a fall in grain yield. Then, we exploit heat stress in spring as an exogenous source of variation in income and find that negative income shocks increase the likelihood of violence against Jews, but only during pogrom waves that are triggered by political turmoil. We find that the likelihood of anti-Jewish violence in the face of an income shock is higher in localities with a greater Jewish concentration among creditors. Our findings show that the ethno-economic segregation is an important determinant of violence against minorities.

How effective is fact checking in countervailing "alternative facts,'' i.e., misleading statements by politicians? In a randomized online experiment during the 2017 French presidential election campaign, we subjected subgroups of 2480 French voters to alternative facts by the extreme-right candidate, Marine Le Pen, and/or corresponding facts about the European refugee crisis from official sources. We find that: (i) alternative facts are highly persuasive; (ii) fact checking improves factual knowledge of voters (iii) but it does not affect policy conclusions or support for the candidate; (iv) exposure to facts alone does not decrease support for the candidate, even though voters update their knowledge. We find evidence consistent with the view that at least part of the effect can be explained by raising salience of the immigration issue.

We provide evidence of corruption in allocation of public procurement and assess its efficiency. Firms with procurement revenue increase tunneling around regional elections, whereas neither tunneling of firms without procurement revenue, nor legitimate business of firms with procurement exhibits a political cycle. Data are consistent with the corruption channel—cash is tunneled to politicians in exchange for procurement contracts—and inconsistent with alternative channels. Using the strength of correlation between procurement revenue and tunneling around elections as a proxy for local corruption, we reject the “efficient grease” hypothesis: in more corrupt localities, procurement contracts go to unproductive firms. (JEL D22, D72, H57, K42, P26, P31, P37)

Bankruptcy laws aim to protect creditors, introduce pressure on managers for financial discipline and restructuring and free assets from inefficient use. Effectiveness of Russian Bankruptcy law is undermined by the political capture of arbitration courts by the regional authorities. Governors in alliance with managers of large regional enterprises use bankruptcy procedure as a mechanism for expropriation of the federal government and outside investors. Recent amendments to the Bankruptcy law, formally motivated by the apparent inefficiencies of current bankruptcy practice, fail to improve creditors protection, while they provide additional power to incumbent managers and governmental agencies.

Does fiscal decentralization lead to more efficient governance, better public goods, and higher economic growth? This paper tests Riker’s theory (1964) that the results of fiscal decentralization depend on the level of countries’ political centralization. We analyze crosssection and panel data from up to 75 developing and transition countries for 25 years. Two of Riker’s predictions about the role of political institutions in disciplining fiscally-autonomous local politicians are confirmed by the data. 1) Strength of national political parties significantly improves outcomes of fiscal decentralization such as economic growth, quality of government, and public goods provision. 2) In contrast, administrative subordination (i.e., appointing local politicians rather than electing them) does not improve the results of fiscal decentralization.

In this review, the author reflects on the heated debates around views about Russia's postcommunist transition expressed in essays collected in new Andrei Shleifer's book, A Normal Country: Russia after Communism (Harvard University Press, 2005), which were initially published at different times during transition. She focuses on the three questions that have been in the center of the debate among academics and policymakers: What should the sequencing and the speed of reforms be? Should a country have political centralization for fiscal decentralization to be efficient? Is Russia normal? The author argues that Russia's most recent history provides convincing evidence in support of the logic of political and economic transformation as it was understood by Shleifer as early as the beginning of the 1990s.

How far can the media protect or undermine democratic institutions in unconsolidated democracies, and how persuasive can they be in ensuring public support for dictator's policies? We study this question in the context of Germany between 1929 and 1939. Using geographical and temporal variation in radio availability, we show that radio had a significant negative effect on the Nazi electoral support between 1929 and 1932, when political news were slanted against Nazi party. This effect was reversed in just 5 weeks following Hitler's appointment as chancellor and the transfer of control of the radio to the Nazis. Pro-Nazi radio propaganda caused higher vote for the Nazis in March 1933 election. After full consolidation of power, radio propaganda helped the Nazis to enroll new party members and encouraged denunciations of Jews and other open expressions of anti-Semitism. The effect of Nazi propaganda was not uniform. Depending on listeners' priors about the message, propaganda could be very effective or could backfire. Nazi radio was most effective in places where anti-Semitism was historically high and had a negative effect on the support for anti-Semitic policies in places with historically low anti-Semitism.

Policy makers may strategically time unpopular measures to coincide with other newsworthy events that distract the media and the public, so as to minimize the political cost of these measures. We test this hypothesis in the context of the recurrent Israeli-Palestinian conflict. Combining daily data on attacks on both sides of the conflict with data on the content of evening news for top U.S. TV networks, we show that Israeli attacks are more likely to be carried out when U.S. news are expected to be dominated by important (non-Israel-or-Palestine-related) events on the following day. Several findings indicate that this association is a result of the strategic behavior of Israeli authorities: i) only attacks that bear higher risk of civilian casualties are timed to newsworthy events; ii) attacks are timed to events that are predictable, and iii) the timing of Israeli retaliations against Palestinian attacks is related to U.S. news only in periods of less intense fighting, when retaliation is less urgent. Based on comprehensive content analysis of conflict-related news, we document that the strategic timing of Israeli attacks is aimed at minimizing news coverage on the following day because next-day news stories are especially charged with negative emotional content. We find no evidence of strategic timing for Palestinian attacks.

This paper tests the theory of opportunistic cycles in a decade-old democracy, Russia, finds strong evidence of cycles, and provides explanation for why previous literature often found weaker evidence. Using the comprehensive list of Russia's regional elections and regional monthly panel data between 1996 and 2003, we find that: (1) budget cycle is very sizable and short-lived: large expansion and contraction in fiscal spending occur within two months of elections on both sides; (2) the magnitude of the cycle decreases with government transparency, level of regional democracy, and voter awareness; (3) cycle becomes smaller over time; (4) pre-electoral manipulation increases incumbents’ chances for re-election. The results confirm theoretical findings that maturity of democracy, transparency, and voter awareness are important in determining the scope for opportunistic cycles. The short length of the cycle explains underestimation of its size by previous literature because of low frequency data used.

Three hypotheses about the nature of federal tax arrears in Russia in the second half of the 1990s are tested empirically. Tax arrears can be a result of: 1) liquidity problems in firms, 2) redistributive subsidies of the federal government, or 3) regional political resistance to federal tax collectors. Liquidity problems in firms explain a large part of the variation in tax arrears. Regional political resistance to federal tax collectors was also an important factor: For a given level of liquidity, federal arrears accumulated faster in regions where governors had a larger popular base, in regions with a better bargaining position vis-a-vis the centre, and in regions with governors in political opposition to the centre. We find that patterns of federal arrears are inconsistent with the redistributive politics premise that redistribution favours jurisdictions with 'closer races' for the incumbent in the national elections. Variation in authorized tax deferrals can be explained in part by federal redistributive politics.

How do the media affect public support for democratic institutions in a fragile democracy? What role do they play in a dictatorial regime? We study these questions in the context of Germany of the 1920s and 1930s. During the democratic period, when the Weimar government introduced pro-government political news, the growth of Nazi popularity slowed down in areas with access to radio. This effect was reversed during the campaign for the last competitive election as a result of the pro-Nazi radio broadcast following Hitler’s appointment as German chancellor. During the consolidation of dictatorship, radio propaganda helped the Nazis to enroll new party members. After the Nazis established their rule, radio propaganda incited anti-Semitic acts and denunciations of Jews to authorities by ordinary Germans. The effect of anti-Semitic propaganda varied depending on the listeners’ predispositions toward the message. Nazi radio was most effective in places where anti-Semitism was historically high and had a negative effect in places with historically low anti-Semitism.

Poland was divided among three empires — Russia, Austria-Hungary, and Prussia — for over a century until 1918. The partition brought about divergence in culture, institutions, and economic development. We use spatial regression discontinuity to examine, which empire effects are persistent. We find that differences in incomes, industrial production, education, corruption, and trust in government institutions disappeared with time as they were smoothed by economic forces and policy intervention. In contrast, differences in intensity of religious practices and in beliefs in democratic ideals, i.e., democratic capital, persist presumably via inter-generational within-family transmission. Differences in railroad infrastructure built by empires during industrialization persisted to this day. Cultural empire legacies have an effect on the political outcomes in contemporary Poland.

We provide evidence of corruption in allocation of public procurement and assess its efficiency. Firms with procurement revenue increase tunneling around regional elections, whereas neither tunneling of firms without procurement revenue, nor legitimate business of firms with procurement exhibits a political cycle. Data are consistent with the corruption channel - cash is tunneled to politicians in exchange for procurement contracts - and inconsistent with alternative channels. Using the strength of correlation between procurement revenue and tunneling around elections as a proxy for local corruption, we reject the "efficient grease" hypothesis: in more corrupt localities, procurement contracts go to unproductive firms.

We test the premise of the theoretical literature that M-form political hierarchies are effective in creating yardstick competition between regional divisions only when those divisions have sufficiently diversified or similar industrial composition. The reason for this is that the competition among poorly diversified inter-related divisions creates incentives for regional leaders to pursue policies that inhibit industrial growth in neighboring regions in order to make their own region look better from the point of view of the center. We use a unique episode in Soviet history, when a traditional Soviet unitary-form (U-form) hierarchy was replaced by a multidivisional-form (M-form) organization, namely, Khrushchev's Sovnarkhoz reform. First, we demonstrate that during this reform regional leaders were subjected to relative performance evaluation, which created incentives to generate industrial growth. Second, we show that these career concerns resulted in higher growth in regions with sufficiently diversified and, therefore, self-contained economies, and lower growth in highly specialized regions.

We test the premise of the theoretical literature that M-form political hierarchies are effective in creating yardstick competition between regional divisions only when divisions have sufficiently diversified or similar industrial composition. The reason is that the competition among poorly-diversified inter-related divisions creates incentives for regional leaders to pursue policies that hurt growth of the neighboring regions in order to make their own region look better from the point of view of the center. We use a unique episode in Soviet history, when a traditional Soviet unitary-form (U-form) hierarchy was replaced by a multidivisional-form (M-form) organization, namely, the Khrushchev’s “Sovnarkhoz” reform. First, we demonstrate that during this reform regional leaders were subjected to relative performance evaluation which created career concerns to generate industrial growth. Second, we show that these career concerns resulted in higher growth in regions with sufficiently diversified and, therefore, self-contained economies and resulted in lower growth in highly specialized regions.

The optimal degree of decentralization depends on the importance of inter-state externalities of local policies. We show that inter-state externalities are determined by the spatial distribution of interest groups within the country. Interest groups who have multi-state scope internalize inter-state externalities to a larger extent than the lobbyists with interests within a single state. We use variation in the geographic boundaries of politically-powerful industrial interests to estimate the effect of inter-state externalities on firm performance. Using firm-level panel data from a peripheralized federation, Russia in 1996-2003, we show that, controlling for firm fixed effects, the performance of firms substantially improves with an increase in the number of neighboring regions under influence of multi-regional business groups compared to the number influenced by local business groups. Our findings have implications for the literatures on federalism and on international trade as trade restrictions are a common source of inter-state externalities.

The optimal degree of decentralization depends on the importance of inter-state externalities of local policies. We show that inter-state externalities are determined by the spatial distribution of interest groups within the country. Interest groups who have multi-state scope internalize inter-state externalities to a larger extent than the lobbyists with interests within a single state. We use variation in the geographic boundaries of politically-powerful industrial interests to estimate the effect of inter-state externalities on firm performance. Using firm-level panel data from a peripheralized federation, Russia in 1996-2003, we show that, controlling for firm fixed effects, the performance of firms substantially improves with an increase in the number of neighboring regions under influence of multi-regional business groups compared to the number influenced by local business groups. Our findings have implications for the literatures on federalism and on international trade as trade restrictions are a common source of inter-state externalities.

We study the nature of judicial bias in bankruptcy proceedings following the enactment of the 1998 bankruptcy law in Russia. The two main findings are as follows. First, regional political characteristics affected judicial decisions about the number and types of bankruptcy proceedings initiated after the law took effect. Controlling for indicators of firms' insolvency and the quality of the regional judiciary, reorganization procedures were significantly more frequent in regions with politically popular governors and governors who had hostile relations with the federal center. Poor judicial quality was also associated with higher incidence of reorganizations. Second, the quality of the regional judiciary affected performance of firms under the reorganization procedure: in regions with low quality judges, firms that were reorganized according to the 1998 law had significantly lower growth in sales, labor productivity, and product variety compared to firms not subject to bankruptcy proceedings. In contrast, in regions with high quality judges, firms in reorganization outperformed firms not in bankruptcy proceedings. This effect of judicial quality on the performance of reorganized firms was stronger when governors were politically popular. These findings are consistent with the view that politically strong governors subverted enforcement of the 1998 bankruptcy law. Journal of Comparative Economics35 (2) (2007) 254-277.

We study the nature of judicial bias in bankruptcy proceedings following the enactment of the 1998 bankruptcy law in Russia. The two main findings are as follows. First, regional political characteristics affected judicial decisions about the numbers and types of bankruptcy proceedings initiated after the law took effect. Controlling for indicators of firms' insolvency and the quality of the regional judiciary, re-organization procedures were significantly more frequent in regions with politically popular governors and governors who had hostile relations with the federal center. Poor judicial quality was also associated with higher incidence of re-organizations. Second, the quality of the regional judiciary affected performance of firms under the re-organization procedure: in regions with low quality judges, firms that were re-organized according to the 1998 law had significantly lower growth in sales, labor productivity, and product variety compared to firms not subject to bankruptcy proceedings. In contrast, in regions with high quality judges, firms in re-organization outperformed firms not in bankruptcy proceedings. This effect of judicial quality on the performance of re-organized firms was stronger when governors were politically popular. These findings are consistent with the view that politically strong governors subverted enforcement of the 1998 bankruptcy law.

Ever since the emergence of the post-Washington consensus, striking differences in economic performance among transition countries and provinces within transition countries have been attributed to differences in the institutional environment. A wide range of institutions has been listed as important for transition to go smoothly, including federalism, political regime, property-rights protection, presence of an outside anchor, social norms, and trust.’ Institutions, however, are not exogenous. Vested interests often influence the evolution of the very rules of the game in the economy. The literature labels this phenomenon state capture or institutional subversion. A cross-country study done by the World Bank and the European Bank for Reconstruction and Development (EBRD) in 1999 confirmed that state capture is deeply rooted in the economic and political processes of Russia, which ranked fourth in the composite index of state capture among 20 transition countries.2 Indeed, the first decade of Russia’s transition was notorious for the intervention of oligarchs in determining the direction and speed of institutional reforms.3 Russia provides a good case for investigating the effects of state capture not only because the problem is clearly present, but also because the high political autonomy of Russia’s regions resulted in wide variations in regional institutions that one can use to explore the phenomenon. In addition, all regional laws are in the public domain. This allowed us to construct a reliable measure of state capture by studying preferential treatments of particular firms in regional legislations. This essay draws on the results of the formal econometric analysis done by Slinko et al. (2003), which examines the effects the capture of regional legislature exercises on the budgetary and regulatory policies of regional governments, aggregate growth, the growth of small businesses, and the performance of captor firms.

Despite the fact that theoretical research on opportunistic political cycles is very intuitive and well developed, empirical literature has found fairly weak evidence of opportunistic political cycles. This Paper tests the theory in a decade-old democracy - Russia. We find strong evidence of very short opportunistic political cycles and provide evidence and explanation why many previous attempts to find evidence failed. Using a comprehensive list of Russia's regional elections and regional monthly panel data between 1996 and 2001, we find that: (1) opportunistic political cycles in regional fiscal policies are sizable and short-lived on average; (2) the magnitude of opportunistic cycles decreases with voters' rationality and awareness (measured by urbanization, computerization, education, and freedom of media); (3) there is a learning curve for voters: cycles become smaller with time; (4) cycles in fiscal policies increase political popularity and the re-election chances of incumbent governors. Our results confirm that maturity of democracy as well as rationality and awareness of the electorate are very important factors in determination of the scope for opportunistic cycles.

How does regulatory capture affect growth? We construct measures of the political power of firms and regional regulatory capture using microlevel data on the preferential treatment of firms through regional laws and regulations in Russia during the period 1992--2000. Using these measures, we find that: (1) politically powerful firms perform better on average; (2) a high level of regulatory capture hurts the performance of firms that have no political connections and boosts the performance of politically connected firms; (3) capture adversely affects small-business growth and the tax capacity of the state; and (4) there is no evidence that capture affects aggregate growth. "oligarchy ... throws a close network of dependence relationships over all the economic and political institutions of present-day bourgeois society without exception... ." --Vladimir Lenin, "Imperialism: The Highest Stage of Capitalism" (1916) Copyright 2005, Oxford University Press.

What are the effects of capture of legislature and regulations by few politically powerful firms on growth and redistribution? We build direct measures of regulatory capture and firms' political power based on a unique micro-level dataset on preferential treatment of selected firms by Russian regional legislature and regulatory agencies during 1992-2000. The findings are: 1) political power generates substantial performance gains to firms both in the long and the short run; 2) capture hurts firms that have no political power: their performance decreases with an increase in the level of capture; 3) at the regional level, capture negatively affects small business growth, tax capacity of the state, and the share of social public expenditure; 4) there is no evidence that regulatory capture has had a significant impact on aggregate growth. We distinguish between two possible determinants of preferential treatments - special interest politics and social redistribution and show that the former is empirically more relevant.

Does fiscal decentralization lead to more efficient governance, better public goods, and higher economic growth? This paper tests Riker''s theory (1964) that the results of fiscal decentralization depend on the level of countries'' political centralization. We analyze crosssection and panel data from up to 75 developing and transition countries for 25 years. Two of Riker''s predictions about the role of political institutions in disciplining fiscally-autonomous local politicians are confirmed by the data. 1) Strength of national political parties significantly improves outcomes of fiscal decentralization such as economic growth, quality of government, and public goods provision. 2) In contrast, administrative subordination (i.e., appointing local politicians rather than electing them) does not improve the results of fiscal decentralization.

Can media affect religious behavior? We study the effect of a drastic change in media landscape on religious participation in Poland, a country, where vast majority of the population considers itself religious Catholics. Before 2015, news on mainstream public and private media outlets had a similar moderately-liberal slant. In 2015, a right-wing populist party Law and Justice (PiS) came to power and took control of the editorial policy of public media, introducing a substantial conservative pro-government and pro-Church bias in public-media broadcast. A private TV network, TVN, remained the main source of freely available independent-from-the-government news on Polish television. In a difference- in-differences setting, we exploit spatial variation in TVN signal, sufficiently good for reception in about two-thirds of the country, and the overtime change in the content of the major state-owned TV network, which has good reception almost everywhere. We document that, after PiS came to power, religious participation fell more in municipalities with access to TVN compared to municipalities receiving only state TV signal. Using a large-scale online randomization experiment, we examine the effects of exposure to different types of content available only via independent media. We show that exposing both the pedophilia within the Church and the mutual financial and political support between the Church and the ruling PiS party decreases trust in religious institutions, but the effect of exposing pedophilia scandals is stronger. The experiment's results persist for at least three weeks.