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Helping Hand or Grabbing hand? State Bureaucracy and Privatization Effectiveness

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Abstract

Why have economic reforms aimed at reducing the role of the state been successful in some cases but not others? Are reform failures the consequence of leviathan states that hinder private economic activity, or of weak states unable to implement policies effectively and provide a supportive institutional environment? We explore these questions in a study of privatization in postcommunist Russia. Taking advantage of large regional variation in the size of public administrations, and employing a multilevel research design that controls for preprivatization selection in the estimation of regional privatization effects, we examine the relationship between state bureaucracy and the impact of privatization on firm productivity. We find that privatization is more effective in regions with relatively large bureaucracies. Our analysis suggests that this effect is driven by the impact of bureaucracy on the postprivatization business environment, with better institutional support and less corruption when bureaucracies are large.
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Suggested Citation

  • J. David Brown & John S. Earle & Scott G. Gellbach, "undated". "Helping Hand or Grabbing hand? State Bureaucracy and Privatization Effectiveness," Upjohn Working Papers jse20091, W.E. Upjohn Institute for Employment Research.
    • Handle: RePEc:upj:weupjo:jse20091
    Note: Appears in American Political Science Review 103(2): 264-283
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    JEL classification:

    • P2 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies

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