Formal and informal institutional change: The evolution of pharmaceutical regulation in Russia, 1991--2004

Political scientists, economists, and practitioners have done much to clarify the ways in which formal institutions (codified judicial, economic and political rules) affect bureaucratic decision-making and policy outcomes. However the ways in which informal institutions influence politicians and officials have been more difficult to decipher. This dissertation investigates the role of informal constraints (defined as spoken or unspoken understandings that complement or contradict official procedures) on bureaucratic decision-making. It draws upon a case study of regulators in the Russian pharmaceutical industry to illustrate the policy impact of formal and informal institutional change during Russia's post-communist transition.; The thesis divides the Russian transition from 1991 to 2004 into three periods. Between 1991 and 1996 overall changes in the political and economic system and in the organization and financing of health care radically altered the formal constraints on regional health care officials. Uncertain of their new responsibilities and unprepared to take the lead in health care reform, civil servants relied heavily on Soviet-era informal rules to make decisions. From 1996 to 2000, regional health care officials became savvier about their role in health care reforms and the regulation of pharmaceutical firms. Informal institutions were adapted to new circumstances, with the use of blat , for instance, morphing into reliance on intermediaries for licensing pharmaceutical firms. In addition, some informal institutions were formalized into regional rules that introduced administrative barriers for firms. From 2000 to 2004, President Putin has worked to reconstruct a powerful central government with enforced formal rules. The new rules have been implemented more effectively than those introduced under President Yeltsin because they bring the "rules of the game" back in line with informal constraints used by officials.; The dissertation provides specific examples of how informal constraints on bureaucratic behavior become more important in periods of uncertainty. It demonstrates that informal rules are both "sticky" and flexible, often adapting to changing conditions more quickly than formal regulation. Finally, it makes clear that reforms that fail to take into account widespread informal rules increase opportunities for corruption and are more vulnerable to failure.