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M-form hierarchy with poorly-diversified divisions: a case of Khrushchev’s reform in Soviet Russia

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  • Markevich, Andrei
  • Zhuravskaya, Ekaterina

Abstract

We test the premise of the theoretical literature that M-form political hierarchies are effective in creating yardstick competition between regional divisions only when divisions have sufficiently diversified or similar industrial composition. The reason is that the competition among poorly-diversified inter-related divisions creates incentives for regional leaders to pursue policies that hurt growth of the neighboring regions in order to make their own region look better from the point of view of the center. We use a unique episode in Soviet history, when a traditional Soviet unitary-form (U-form) hierarchy was replaced by a multidivisional-form (M-form) organization, namely, the Khrushchev’s 'Sovnarkhoz' reform. First, we demonstrate that during this reform regional leaders were subjected to relative performance evaluation which created career concerns to generate industrial growth. Second, we show that these career concerns resulted in higher growth in regions with sufficiently diversified and, therefore, self-contained economies and resulted in lower growth in highly specialized regions.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 8221.

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Date of creation: Feb 2011
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Handle: RePEc:cpr:ceprdp:8221

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Keywords: diversification; M-form hierarchy; Soviet economy; yardstick competition;

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References

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Cited by:
  1. Pierre Salmon, 2013. "Decentralization and growth: what if the cross-jurisdiction approach had met a dead end?," Constitutional Political Economy, Springer, vol. 24(2), pages 87-107, June.
  2. Marina Dodlova, 2013. "Political Accountability and Real Authority of Government Bureaucracy," CESifo Working Paper Series 4443, CESifo Group Munich.
  3. Pierre Salmon, 2013. "Horizontal competition in multilevel governmental settings," Working Papers hal-00830876, HAL.

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