Helping Hand or Grabbing Hand? State Bureaucracy and Privatization Effectiveness

37 Pages Posted: 2 Feb 2009

See all articles by J. David Brown

J. David Brown

US Census Bureau Center for Economic Studies; IZA Institute of Labor Economics

John S. Earle

George Mason University - Schar School of Policy and Government; IZA Institute of Labor Economics

Scott Gehlbach

University of Wisconsin-Madison

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 research 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 bureaucracies are large.

Keywords: privatization, bureaucracy, economic reform, Russia

JEL Classification: H11, L33, P23, P26, P37, P48

Suggested Citation

Brown, J. David and Earle, John S. and Gehlbach, Scott, Helping Hand or Grabbing Hand? State Bureaucracy and Privatization Effectiveness. IZA Discussion Paper No. 3958. Available at SSRN: https://ssrn.com/abstract=1336055

J. David Brown (Contact Author)

US Census Bureau Center for Economic Studies ( email )

4600 Silver Hill Road
Washington, DC 20233
United States
301-763-8769 (Phone)
301-763-5935 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

John S. Earle

George Mason University - Schar School of Policy and Government ( email )

3351 Fairfax Drive
MS 3B1
Arlington, VA 22201
United States
703-993-8023 (Phone)

HOME PAGE: http://earle.gmu.edu

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Scott Gehlbach

University of Wisconsin-Madison ( email )

1050 Bascom Mall
Madison, WI 53706
United States
608-263-2391 (Phone)

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