Political cycles and corruption in Russian regions

It has been established that opportunistic incumbent politicians, both elected and appointed, adjust public policies in systematic ways over political cycles. We show that the corrupt behavior of appointed politicians also follows certain patterns which are driven by political cycles. Based on BEEPS data, exploiting variation in the dates of surveys and in the starting dates of Russian regional governors' terms of office, we find that corruption levels, as perceived by firms operating in different regions of Russia, are higher closer to the end of a regional governor's term. We argue that such a pattern cannot be explained by standard political budget cycle reasoning, but rather that the observed pattern may be generated by governors' accumulation of private information about their likelihood of remaining in office for another term. When a governor gradually learns that he will not be re-appointed once his current term has expired, he has increasing incentives to engage in corrupt activities in order to accumulate wealth before his departure. Alternatively, when a governor becomes more certain that he will remain in office, he may have higher incentives to smooth rent extraction over time and thus not to increase it. We test this explanation in several ways and consistently find supporting evidence.