Ownership versus environment : disentangling the sources of public sector inefficiency
The authors compare the performance of public and private sector manufacturing firms in Indonesia for 1981-95. They analyze whether public sector inefficiency is due primarily to agency-type problems ("ownership") or to the business environment in which public enterprises operate, as measured by soft budget constraints or barriers to competition. They nest the two alternatives in a production function framework. The results, obtained from fixed-effects specifications, provide support for both models. The business environment matters. Only public enterprises that received loans from state banks or those shielded from import competition performed worse than private enterprises. Ownership matters. For a given level of import competition or soft loans, public enterprises perform worse than their counterparts in the private sector. Eliminating soft loans to Indonesia's public enterprises would raise total factor productivity by 6 percentage points; the same result could be achieved by increasing import penetration by 15 percentage points. The authors show that these findings are not due to selection effects for either privatization or the receipt of soft loans.
|Date of creation:||31 Jan 2000|
|Date of revision:|
|Contact details of provider:|| Postal: 1818 H Street, N.W., Washington, DC 20433|
Phone: (202) 477-1234
Web page: http://www.worldbank.org/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Theodore Groves & Yongmiao Hong & John McMillan & Barry Naughton, 1994. "Autonomy and Incentives in Chinese State Enterprises," The Quarterly Journal of Economics, Oxford University Press, vol. 109(1), pages 183-209.
- Zvi Griliches & Jacques Mairesse, 1995.
"Production Functions: The Search for Identification,"
NBER Working Papers
5067, National Bureau of Economic Research, Inc.
- Zvi Griliches & Jacques Mairesse, 1995. "Production Functions: The Search for Identification," Harvard Institute of Economic Research Working Papers 1719, Harvard - Institute of Economic Research.
- Z, Griliches & Jacques Mairesse, 1997. "Production Functions : The Search for Identification," Working Papers 97-30, Centre de Recherche en Economie et Statistique.
- Zvi Griliches & Jerry A. Hausman, 1984.
"Errors in Variables in Panel Data,"
NBER Technical Working Papers
0037, National Bureau of Economic Research, Inc.
- Claessens, Stijn & Djankov, Simeon, 1998. "Politicians and firms in seven central and eastern European countries," Policy Research Working Paper Series 1954, The World Bank.
- Harrison, Ann E., 1994. "Productivity, imperfect competition and trade reform : Theory and evidence," Journal of International Economics, Elsevier, vol. 36(1-2), pages 53-73, February.
- Pitt, Mark M. & Lee, Lung-Fei, 1981. "The measurement and sources of technical inefficiency in the Indonesian weaving industry," Journal of Development Economics, Elsevier, vol. 9(1), pages 43-64, August.
- Pinto, Brian & van Wijnbergen, Sweder, 1995.
"Ownership and Corporate Control in Poland: Why State Firms Defied the Odds,"
CEPR Discussion Papers
1273, C.E.P.R. Discussion Papers.
- Pinto, Brian & van Wijnbergen, Sweder, 1994. "Ownership and corporate control in Poland : why state firms defied the odds," Policy Research Working Paper Series 1308, The World Bank.
- Narjess Boubakri & Jean-Claude Cosset, 1998. "The Financial and Operating Performance of Newly Privatized Firms: Evidence from Developing Countries," Journal of Finance, American Finance Association, vol. 53(3), pages 1081-1110, 06.
- Funkhouser, Richard & MacAvoy, Paul W., 1979. "A sample of observations on comparative prices in public and private enterprises," Journal of Public Economics, Elsevier, vol. 11(3), pages 353-368, June.
- Ehrlich, Isaac & Georges Gallais-Hamonno & Zhiqiang Liu & Randall Lutter, 1994. "Productivity Growth and Firm Ownership: An Analytical and Empirical Investigation," Journal of Political Economy, University of Chicago Press, vol. 102(5), pages 1006-38, October.
- John Vickers & George Yarrow, 1991. "Economic Perspectives on Privatization," Journal of Economic Perspectives, American Economic Association, vol. 5(2), pages 111-132, Spring.
- Robert H. Gertner & David S. Scharfstein & Jeremy C. Stein, 1994. "Internal versus External Capital Markets," NBER Working Papers 4776, National Bureau of Economic Research, Inc.
- Andrei Shleifer & Robert W. Vishny, 1994. "Politicians and Firms," The Quarterly Journal of Economics, Oxford University Press, vol. 109(4), pages 995-1025.
- Rafael La Porta & Florencio Lopez-de-Silane, 1997.
"The Benefits of Privatization: Evidence from Mexico,"
NBER Working Papers
6215, National Bureau of Economic Research, Inc.
- Rafael La Porta & Florencio López-de-Silanes, 1997. "The Benefits of Privatization : Evidence from Mexico," World Bank Other Operational Studies 11583, The World Bank.
- M Arellano & O Bover, 1990.
"Another Look at the Instrumental Variable Estimation of Error-Components Models,"
CEP Discussion Papers
dp0007, Centre for Economic Performance, LSE.
- Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
- Megginson, William L & Nash, Robert C & van Randenborgh, Matthias, 1994. " The Financial and Operating Performance of Newly Privatized Firms: An International Empirical Analysis," Journal of Finance, American Finance Association, vol. 49(2), pages 403-52, June.
- Robert H. Gertner & David S. Scharfstein & Jeremy C. Stein, 1994. "Internal versus External Capital Markets," The Quarterly Journal of Economics, Oxford University Press, vol. 109(4), pages 1211-1230.
- Kikeri, Sunita & Nellis, John & Shirley, Mary, 1994. "Privatization: Lessons from Market Economies," World Bank Research Observer, World Bank Group, vol. 9(2), pages 241-72, July.
When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:2272. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi)
If references are entirely missing, you can add them using this form.