Essays on Informal Practices, Foreign Direct Investment and Economic Development

Sinikka Parviainen

Research output: ThesisDoctoral ThesisCollection of Articles


This doctoral dissertation is a collection of three essays that study the relationship of informal practices with economic development using both micro- and macro-level approaches. The first essay is solely authored, and the latter two are collaborations. In the first essay, I study the use of non-monetary exchange between firms in Russia with a unique survey data set from the 2000s. The essay analyses whether the use of barter is based on strategic motives such as profit-seeking or dictated by circumstances and pure survival in a hostile business environment using a new econometric approach to the subject. The results indicate that on average, a larger size, private ownership, increased indebtedness and a decreased profit margin for firms in regions with a higher risk of crime are associated with the use of barter and offsets. However, increase in the use of barter is not related to regionalcrime risk but only to firm level indicators. Furthermore, larger firms and those that date prior to the demise of the Soviet Union or the 1990s are more likely to use barter and appear to mitigate falling profitability by utilising barter and offsets while these firms are not loss-making on average; implying that non-monetary exchange is used forstrategic purposes. In the second essay, we study the differences between perception and experience based indicators of corruption and their implied effects on attracting foreign direct investment into a given country. In our analysis, we show that while perceptions of corruption are significantly associated with the amount of foreign direct investment (FDI) that a country attracts, the actual experience on the ground is not significantly linked to attraction of FDI. We also find some evidence that greenfield investment is significantly associated with the experience of corruption while mergers and acquisitions are driven by perceptions. The third essay studies the relationship between corruption and the shadow economy at the sub-national level with firm-level data.  In the essay, we ask whether sub-national regions in which more firms say that corruption is a problem for their operations also have more firms claiming that the practices of informal sector competitors are a problem for their operations. Our finding that regions with a high share of firms holding the perception that corruption is a problem tend to have a high share of firms with the view that the shadow economy is q problem, and vice versa, is in line with the existing cross-country literature. Africa seems to be different, however, in that neither of these findings holds when we restrict our sample to sub-Saharan African countries.
Translated title of the contributionEssays on Informal Practices, Foreign Direct Investment and Economic Development
Original languageEnglish
QualificationDoctor's degree
Awarding Institution
  • Aalto University
  • Haaparanta, Pertti, Supervising Professor
  • Ledyaeva, Svetlana, Thesis Advisor
  • Gillanders, Robert, Thesis Advisor
  • Nilsson Hakkala, Katariina, Supervising Professor
Print ISBNs978-952-60-8600-2
Electronic ISBNs978-952-60-8601-9
Publication statusPublished - 2019
MoE publication typeG5 Doctoral dissertation (article)


  • informal practices
  • corruption
  • shadow economy
  • foreign direct investment
  • non-monetary exchange
  • Russia


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