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Privatization, Competition, and Budget Constraints: Disciplining Enterprises in Russia

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  • John Earle
  • Saul Estrin

Abstract

We investigate whether privatization, competitive forces, and the hardening of budget constraints played efficiency-enhancing roles in Russia in the immediate post-privatization period. We find evidence of a positive impact of privatization on labor productivity: a 10% point increase in private share ownership raises real sales per employee by 3–5%. The evidence on product market competition is weaker, depending on model specification. Soft budget constraints are usually found to reduce restructuring but the effect is small and insignificant. We find that in terms of their impacts on productivity, privatization and subsidy reduction are substitutes; privatization and competition (measured as the geographic scope of markets) are complements; and that competition and subsidy reduction are independent. Copyright Kluwer Academic Publishers 2003

Suggested Citation

  • John Earle & Saul Estrin, 2003. "Privatization, Competition, and Budget Constraints: Disciplining Enterprises in Russia," Economic Change and Restructuring, Springer, vol. 36(1), pages 1-22, March.
    • Handle: RePEc:kap:ecopln:v:36:y:2003:i:1:p:1-22
    DOI: 10.1023/B:ECOP.0000005749.89697.13
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    Keywords

    competition; enterprise performance; import discipline; market structure; privatization; Russia; soft budget constraints; subsidies; transition;
    All these keywords.

    JEL classification:

    • P2 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies
    • P23 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Factor and Product Markets; Industry Studies; Population

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