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, the authors 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. They examine whether closer ties to foreign corporations result
in the diffusion of transparency to private Russian firms. They 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. It is also found 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.
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