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Privatization in Russia: What Should be a Firm?

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  • Paul Joskow
  • Richard Schmalensee

Abstract

This paper examines a variety of issues associated with the restructuring of Russian industry prior to privatization, from a transactions cost perspective. It is argued that none of the components of the industrial hierarchies inherited from the Soviet system corresponded closely to firms in a modem market economy. Moreover, product-level concentration of production created potential monopoly problems. Ideally, it would have been desirable to restructure Russian industry to create efficient organizations and competitive market structures prior to privatization. However, political and information constraints precluded widespread fine tuning of the existing industrial hierarchies prior to privatization. Given these constraints, the decision of the Gaidar government to focus privatization on 'enterprises', i.e. the smallest organizational units within the industrial hierarchies, was sensible and led to significant deconcentration of Russian industry. Policies with regard to voluntary separation of subunits of enterprises and aggregation of enterprises prior to privatization also helped to promote deconcentration. Significant additional restructuring of Russian industry is expected now that the mass privatization has been completed.

Suggested Citation

  • Paul Joskow & Richard Schmalensee, 1995. "Privatization in Russia: What Should be a Firm?," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 2(2), pages 297-327.
    • Handle: RePEc:taf:ijecbs:v:2:y:1995:i:2:p:297-327
    DOI: 10.1080/758519315
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    References listed on IDEAS

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    1. Brown, A.N. & Ickes, B. & Ryterman, R., 1993. "The Myth of Monopoly: A New View of Industrial Structure in Russia," Papers 10-93-5, Pennsylvania State - Department of Economics.
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    Cited by:

    1. Jozef Konings & Patrick Van Cayseele & Frederic Warzynski, 2005. "The Effects of Privatization and Competitive Pressure on Firms' Price-Cost Margins: Micro Evidence from Emerging Economies," The Review of Economics and Statistics, MIT Press, vol. 87(1), pages 124-134, February.
    2. Asaftei, Gabriel & Parmeter, Christopher F., 2010. "Market power, EU integration and privatization: The case of Romania," Journal of Comparative Economics, Elsevier, vol. 38(3), pages 340-356, September.
    3. Francesc Trillas, 2004. "The structure of corporate ownership in privatized utilities," Investigaciones Economicas, Fundación SEPI, vol. 28(2), pages 257-284, May.
    4. repec:lic:licosd:12502 is not listed on IDEAS
    5. A.S. Bim, 1996. "Ownership, Control Over the Enterprises and Strategies of Stockholders ," Working Papers wp96050, International Institute for Applied Systems Analysis.

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