Do Competition and Ownership Affect Enterprise Efficiency in the Absence of Market Institutions? Evidence after Privatization in Mongolia
38 Pages Posted: 19 Sep 1999
Date Written: January 25, 1999
Mongolia's mass privatization program was implanted in a country that lacked the very basic institutions of capitalism. This paper examines the effects of competition and ownership on the efficiency of the newly privatized enterprises, using a representative sample of enterprises and controlling for possible selection biases. Competition has quantitatively large effects, perfectly competitive firms having nearly double the efficiency of monopolies. Enterprises with residual state ownership appear to be more efficient than other enterprises, reflecting an environment where the government was pressured to focus on efficiency and institutions gave little voice to outsider owners.
JEL Classification: P0, L1, L33, 012
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