Original Sin, Good Works, and Property Rights in Russia

Are property rights obtained through dubious means forever tainted with original sin, or can right holders make their ill-gotten gains legitimate by doing good works? This is a critical question for developing and transition countries, where privatization is often opaque and businesspeople may receive property, but remain unwilling to use it productively due to concerns about the vulnerability of their rights to political challenge. Using a survey of 660 businesspeople conducted in Russia in 2005, the author finds that the original sin of an illegal privatization is difficult to expunge. Contrary to a "Coasian" view of privatization, property rights transferred through a legally questionable privatization are seen as illegitimate long after privatization. Businesspeople, however, can improve the legitimacy of property rights by doing good works, such as providing public goods and using their assets well. Finally, managers who provide public goods for their region are more likely to invest in their firms than those who do not. This suggests a possible political rationale for the provision of public goods by private firms. These findings have implications for studies of privatization, property rights, and business-state relations in transitions and developing countries.