Citation

Discussion Paper Details

Please find the details for DP2758 in an easy to copy and paste format below:

Full Details   |   Bibliographic Reference

Full Details

Title: Privatization, Competition and Reform Strategies: Theory and Evidence from Russian Enterprise Panel Data

Author(s): J David Brown and John S Earle

Publication Date: April 2001

Keyword(s): Competition, Market Structure, Privatization, Russia, Structure Conduct Performance and Transition

Programme Area(s): Transition Economics

Abstract: A critical, but largely unexamined assumption in the debate over reform policy design, concerns the complementarity or substitutability of market competition and private ownership in increasing firm efficiency. We analyse a simple Cournot model that distinguishes two aspects of privatization interacting with market opening: privatization of a firm and privatization of its competitors. Under plausible conditions, the model implies that privatizing a firm is a substitute for exposing it to competitive markets, but privatizing its competitors is complementary. Our empirical analysis uses augmented 3-factor translog production functions estimated on 1992-99 panel data for 13,288 Russian manufacturing enterprises. We find that nonstate ownership of a firm reduces the marginal efficiency impact from product market dispersion, but the share of its competitors that are nonstate increases this marginal impact. Disaggregating nonstate ownership, we find that the shares of competitors in all three nonstate types are complementary with dispersed market structure, where the strongest complementarity involves foreign ownership. The evidence suggests that an important indirect impact of private ownership may be the intensification of market competition, and thus that competition only among state-owned enterprises may be ineffectual in stimulating them to increase efficiency.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=2758

Bibliographic Reference

Brown, J and Earle, J. 2001. 'Privatization, Competition and Reform Strategies: Theory and Evidence from Russian Enterprise Panel Data'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=2758