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Are Oligarchs Productive? Theory and Evidence

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  • Gorodnichenko, Yuriy

    ()
    (University of California, Berkeley)

  • Grygorenko, Yegor

    ()
    (affiliation not available)

Abstract

This paper develops a partial equilibrium model to account for stylized facts about the behavior of oligarchs, politically and economically strong conglomerates in transition and developing countries. The model predicts that oligarchs are more likely than other owners to invest in productivity enhancing projects and to vertically integrate firms to capture the gains from possible synergies and, thus, oligarchs can be productive. Using a unique dataset comprising almost 2,000 Ukrainian open joint stock companies, the paper tests empirical implications of the model. In contrast to commonly held views, econometric results suggest that, after controlling for endogeneity of ownership, oligarchs can improve the performance of the firms they own relative to other firms.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3282.

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Length: 52 pages
Date of creation: Jan 2008
Date of revision:
Publication status: published in: Journal of Comparative Economics, 2008, 36 (1), 17-42
Handle: RePEc:iza:izadps:dp3282

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Keywords: treatment effect; oligarch; transition; firm performance; property rights;

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  1. J. David Brown & John Earle & Almos Telegdy, 2005. "The Productivity Effects of Privatization: Longitudinal Estimates from Hungary, Romania, Russia, and Ukraine," CERT Discussion Papers, Centre for Economic Reform and Transformation, Heriot Watt University 0508, Centre for Economic Reform and Transformation, Heriot Watt University.
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Citations

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Cited by:
  1. Benjamin Maury & Eva Liljeblom, 2009. "Oligarchs, political regime changes, and firm valuation," The Economics of Transition, The European Bank for Reconstruction and Development, The European Bank for Reconstruction and Development, vol. 17(3), pages 411-438, 07.
  2. Gorodnichenko, Yuriy & Schnitzer, Monika, 2010. "Financial constraints and innovation: Why poor countries don't catchup," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 341, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  3. Estrin, Saul & Hanousek, Jan & Svejnar, Jan, 2009. "Effects of Privatization and Ownership in Transition Economies," Policy Research Working Paper Series 4811, The World Bank.
  4. Sprenger, Carsten, 2011. "The choice of ownership structure: Evidence from Russian mass privatization," Journal of Comparative Economics, Elsevier, vol. 39(2), pages 260-277, June.
  5. Guriev, Sergei & Rachinsky, Andrei, 2006. "The Evolution of Personal Wealth in the Former Soviet Union and Central and Eastern Europe," Working Paper Series, World Institute for Development Economic Research (UNU-WIDER) RP2006/120, World Institute for Development Economic Research (UNU-WIDER).
  6. Jürgen Wandel, 2011. "Business groups and competition in post-Soviet transition economies: The case of Russian “agroholdings”," The Review of Austrian Economics, Springer, Springer, vol. 24(4), pages 403-450, December.
  7. Iwasaki, Ichiro, 2014. "Global financial crisis, corporate governance, and firm survival:," Journal of Comparative Economics, Elsevier, vol. 42(1), pages 178-211.
  8. Muzaffarjon Ahunov & Leo Van Hove & Marc Jegers, 2013. "Selection and hidden bias in cross-border bank acquisitions: Ukraine’s takeover wave," Working Papers, European Bank for Reconstruction and Development, Office of the Chief Economist 162, European Bank for Reconstruction and Development, Office of the Chief Economist.
  9. Salla Pöyry & Benjamin Maury, 2010. "Influential ownership and capital structure," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 31(5), pages 311-324.
  10. Saul Estrin & Jan Hanousek & Evzen Kocenda & Jan Svejnar, 2009. "The Effects of Privatization and Ownership in Transition Economies," Journal of Economic Literature, American Economic Association, vol. 47(3), pages 699-728, September.

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