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Can the Growth of Competitive Pressure and Hardening of Budget Constraints Reduce the Efficiency Loss due to State Ownership?

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  • Evguenia Bessonova

    (Bank of Russia, HSE University)

  • Ksenia Gonchar

    (HSE University)

Abstract

This paper studies how market structure and subsidisation affect the productivity gap between state-owned enterprises (SOEs) and private enterprises in the specific context of an economy with a long history of state involvement in industry and continued government intervention after the completion of privatisation. The results suggest that private firms are 7-8 percentage points closer to the sectoral technical frontier and their total factor productivity grows 0.5 points faster than that of SOEs. This difference persists at all levels of competition, while neither ownership type is superior in concentrated markets. When competition levels are more than moderate, SOEs show greater response to further growth of competition than private firms do. High subsidies reduce the productivity advantages of private firms, but harder budget constraints do not make government firms more efficient.

Suggested Citation

  • Evguenia Bessonova & Ksenia Gonchar, 2022. "Can the Growth of Competitive Pressure and Hardening of Budget Constraints Reduce the Efficiency Loss due to State Ownership?," Russian Journal of Money and Finance, Bank of Russia, vol. 81(3), pages 22-53, September.
    • Handle: RePEc:bkr:journl:v:81:y:2022:i:3:p:22-53
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    Cited by:

    1. Aleksandr E. Abramov & Andrei A. Pershin & Maria I. Chernova, 2023. "Measuring the State Sector and Assessing Its Effectiveness: Approaches and Implications," Finansovyj žhurnal — Financial Journal, Financial Research Institute, Moscow 125375, Russia, issue 2, pages 27-46, April.

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    More about this item

    Keywords

    ownership; competition; subsidies; productivity;
    All these keywords.

    JEL classification:

    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • P31 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Socialist Enterprises and Their Transitions

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