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

J. David Brown and John Earle

No 2758, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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.

Keywords: Market structure; Competition; Transition; Russia; Privatization; structure conduct performance (search for similar items in EconPapers)
JEL-codes: L10 L32 L33 P23 (search for similar items in EconPapers)
Date: 2001-04
References: Add references at CitEc
Citations: View citations in EconPapers (44)

Downloads: (external link)
https://cepr.org/publications/DP2758 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:2758

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP2758

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().