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Helping Hand or Grabbing Hand? State Bureaucracy and Privatization Effectiveness

Author

Listed:
  • J. David Brown

    (Heriot-Watt University)

  • John S. Earle

    (W.E. Upjohn Institute for Employment Research and Central European University)

  • Scott Gehlbach

    (University of Wisconsin, Madison and CEFIR)

Abstract

Why have economic reforms aimed at reducing the role of the state been successful in some cases but not others? Are reform failures the consequence of leviathan states that hinder private economic activity, or of weak states unable to implement policies effectively and provide a supportive institutional environment? We explore these questions in a study of privatization in postcommunist Russia. Taking advantage of large regional variation in the size of public administrations, and employing a multilevel re-search design that controls for pre-privatization selection in the estimation of regional privatization effects, we examine the relationship between state bureaucracy and the impact of privatization on firm productivity. We find that privatization is more effective in regions with relatively large bureaucracies. Our analysis suggests that this effect is driven by the impact of bureaucracy on the post-privatization business environment, with better institutional support and less corruption when bueaucracies are large.

Suggested Citation

  • J. David Brown & John S. Earle & Scott Gehlbach, 2008. "Helping Hand or Grabbing Hand? State Bureaucracy and Privatization Effectiveness," Upjohn Working Papers 08-142, W.E. Upjohn Institute for Employment Research.
    • Handle: RePEc:upj:weupjo:08-142
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    More about this item

    Keywords

    privatization; bureaucracy; economic reform; Russia;
    All these keywords.

    JEL classification:

    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
    • P23 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Factor and Product Markets; Industry Studies; Population
    • P26 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Property Rights
    • P37 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Legal
    • P48 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies

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