| 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. |