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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.

Suggested Citation

  • Gorodnichenko, Yuriy & Grygorenko, Yegor, 2008. "Are Oligarchs Productive? Theory and Evidence," IZA Discussion Papers 3282, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp3282
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    Cited by:

    1. Fidrmuc, Jarko & Gundacker, Lidwina, 2017. "Income inequality and oligarchs in Russian regions: A note," European Journal of Political Economy, Elsevier, vol. 50(C), pages 196-207.
    2. Jürgen Wandel, 2011. "Business groups and competition in post-Soviet transition economies: The case of Russian “agroholdings”," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 24(4), pages 403-450, December.
    3. Guriev, Sergei & Rachinsky, Andrei, 2006. "The Evolution of Personal Wealth in the Former Soviet Union and Central and Eastern Europe," WIDER Working Paper Series 120, World Institute for Development Economic Research (UNU-WIDER).
    4. Huynh, Kim P. & Jacho-Chávez, David T. & Kryvtsov, Oleksiy & Shepotylo, Oleksandr & Vakhitov, Volodymyr, 2016. "The evolution of firm-level distributions for Ukrainian manufacturing firms," Journal of Comparative Economics, Elsevier, vol. 44(1), pages 148-162.
    5. Yuriy Gorodnichenko & Monika Schnitzer, 2013. "Financial Constraints And Innovation: Why Poor Countries Don'T Catch Up," Journal of the European Economic Association, European Economic Association, vol. 11(5), pages 1115-1152, October.
    6. Christopher F. Baum & Mustafa Caglayan & Dorothea Schäfer & Oleksandr Talavera, 2008. "Political patronage in Ukrainian banking," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 16(3), pages 537-557, July.
    7. Brown, J. David & Earle, John S. & Shpak, Solomiya & Vakhitov, Volodymyr, 2015. "Is Privatization Working in Ukraine? New Estimates from Comprehensive Manufacturing Firm Data, 1989-2013," IZA Discussion Papers 9261, Institute for the Study of Labor (IZA).
    8. Levoshko, Tamila, 2017. ""Pork-Barrel"-Politik und das regionale Wirtschaftswachstum. Empirische Evidenz für die Ukraine und Polen," Working Papers 0642, University of Heidelberg, Department of Economics.
    9. Iwasaki, Ichiro, 2014. "Global financial crisis, corporate governance, and firm survival:," Journal of Comparative Economics, Elsevier, vol. 42(1), pages 178-211.
    10. Earle, John S. & Gehlbach, Scott, 2014. "The Productivity Consequences of Political Turnover: Firm-Level Evidence from Ukraine's Orange Revolution," IZA Discussion Papers 8510, Institute for the Study of Labor (IZA).
    11. 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.
    12. Salla Pöyry & Benjamin Maury, 2010. "Influential ownership and capital structure," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 31(5), pages 311-324.
    13. 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.
    14. Christos Kalantaridis, 2014. "Institutional change in the Schumpeterian--Baumolian construct: power, contestability and evolving entrepreneurial interests," Entrepreneurship & Regional Development, Taylor & Francis Journals, vol. 26(1-2), pages 1-22, April.
    15. Saul Estrin & Svetlana Poukliakova & Daniel Shapiro, 2009. "The Performance Effects of Business Groups in Russia," Journal of Management Studies, Wiley Blackwell, vol. 46(3), pages 393-420, May.
    16. Benjamin Maury & Eva Liljeblom, 2009. "Oligarchs, political regime changes, and firm valuation," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 17(3), pages 411-438, July.
    17. repec:ebd:wpaper:162 is not listed on IDEAS
    18. Ivanovic, Vladan & Kufenko, Vadim & Begovic, Boris & Stanisic, Nenad & Geloso, Vincent, 2016. "Continuity under a different name: The outcome of privatisation in Serbia," Hohenheim Discussion Papers in Business, Economics and Social Sciences 10-2016, University of Hohenheim, Faculty of Business, Economics and Social Sciences.
    19. Chernenko, Demid, 2018. "Capital Structure and Oligarch Ownership," MPRA Paper 83641, University Library of Munich, Germany.

    More about this item

    Keywords

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

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • P26 - Economic Systems - - Socialist Systems and Transition Economies - - - Political Economy
    • P31 - Economic Systems - - Socialist Institutions and Their Transitions - - - Socialist Enterprises and Their Transitions

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