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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 those divisions have sufficiently diversified or similar industrial composition. The reason for this is that the competition among poorly diversified inter-related divisions creates incentives for regional leaders to pursue policies that inhibit industrial growth in 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, Khrushchev's Sovnarkhoz reform. First, we demonstrate that during this reform regional leaders were subjected to relative performance evaluation, which created incentives 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 lower growth in highly specialized regions.

Suggested Citation

  • Markevich, Andrei & Zhuravskaya, Ekaterina, 2011. "M-form hierarchy with poorly-diversified divisions: A case of Khrushchev's reform in Soviet Russia," Journal of Public Economics, Elsevier, vol. 95(11), pages 1550-1560.
  • Handle: RePEc:eee:pubeco:v:95:y:2011:i:11:p:1550-1560 DOI: 10.1016/j.jpubeco.2011.06.003
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    References listed on IDEAS

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    Citations

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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, pages 87-107.
    2. Huang,Zhangkai & Li,Lixing & Ma,Guangrong & Xu,L. Colin, 2015. "Hayek, local information, and the decentralization of state-owned enterprises in China," Policy Research Working Paper Series 7321, The World Bank.
    3. Petra Persson & Ekaterina Zhuravskaya, 2016. "The Limits Of Career Concerns In Federalism: Evidence From China," Journal of the European Economic Association, European Economic Association, vol. 14(2), pages 338-374, April.
    4. Marina Dodlova, 2013. "Political Accountability and Real Authority of Government Bureaucracy," CESifo Working Paper Series 4443, CESifo Group Munich.
    5. Ciqi Mei & Zhilin Liu, 2014. "Experiment-based policy making or conscious policy design? The case of urban housing reform in China," Policy Sciences, Springer;Society of Policy Sciences, vol. 47(3), pages 321-337, September.
    6. Pierre Salmon, 2013. "Horizontal competition in multilevel governmental settings," Working Papers hal-00830876, HAL.

    More about this item

    Keywords

    M-form hierarchy; Yardstick competition; Soviet economy; Diversification;

    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • N44 - Economic History - - Government, War, Law, International Relations, and Regulation - - - Europe: 1913-
    • P3 - Economic Systems - - Socialist Institutions and Their Transitions

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